Finn Brennan ASLEF Distri
TfL Pension review. Update from March 17th announcement.
Although TfL was supposed to agree a frequently postponed “final detailed proposal” for pension reform with the government by March 17th, from the exchange of letters released yesterday, it is obvious that a realistic proposal, let alone a “final detailed” one is a long way away.
Rather like a divorcing couple, each arguing that the other should take custody of a badly behaved pet, neither the government nor TfL want to take responsibility for the damage caused by the breakdown of their relationship.
TfL would like to remove what they claim are the financial risks to them of a large defined benefit scheme. Although the pension fund has a healthy surplus, they worry that if markets and interest rates move the wrong way, there could be a deficit at a future valuation that they would need to fund.
Of course, there will be ups and downs in any long-term investments, but the very long-term nature of the pension fund means that in reality the risks to TfL of market volatility are actually quite low. Even if the funding position was poor at one particular valuation point, that would correct as markets recover. And the healthy surplus that the fund now has gives a strong buffer against future volatility.
The governments motivation is primarily political. Tory members of the London Assembly have long moaned and complained about the fact that TfL staff have decent pensions. (It has never been clear to me quite why Tories dislike the idea of working people having a good retirement, but I suspect that there is a strong element of resentment of working class people getting above ourselves).
Although they say they want to reduce the costs of the TfL pension fund, they are very clear that they do not want to take on any of the risks involved in reducing that cost. They have ruled out the simplest option, providing a Crown Guarantee. That would have saved the TfL fund at least £16 million a year which currently has to go to the Pension Protection fund and meant that different investment strategies to target higher future returns could be used.
Both the Government and TfL say that protecting the benefits that Scheme members have built up to date is a priority. They now both accept that if there are to be major changes it will require legislation in parliament. The Department for Transport say that “this will be subject to cross-Government agreement, identifying a suitable legislative vehicle, and available parliamentary time” which tends to suggest this won’t be a quick process !
TfL point out that as the government has ruled out so many possible options, the most realistic change option being suggested would be moving the current schemes assets and liabilities into the Local Government Pension Scheme (LGPS). They then ask the government to explain their rational for supporting that idea and how it would save money? (It wouldn’t, it would be a hugely expensive exercise that would generate large fees for lawyers and actuaries and just moves cost from one government budget to another).
It also seems to rather miss the point that the schemes assets don’t belong to TfL, they belong to the pension fund members under the stewardship of the Trustee. And it is not clear why the Trustees of the LGPS would want to take on the risks and costs associated with a transfer either.
There are other questions that TfL have put to the government too. For example there are a large number of “protected persons “ in the current scheme whose benefits can only be changed if they give individual consent, something that seems very unlikely.
In effect TfL have asked the DfT to show them their homework with a strong suggestion that they haven’t actually done the homework.
So, what happens now? TfL have passed the ball back to the DfT to answer the questions they have asked and to explain exactly what process they intend to follow and how they want to proceed. They have pointed out that untill there are answers to these questions no progress can be made towards a “final proposal” and that the current timescale for starting consultation is not achievable.
ASLEF and the other trade unions have argued all along that changes to the current scheme are unnecessary. TfL have already been able to make a huge reduction, around £70 million, in their costs. The scheme is well managed with a healthy surplus. All the review has done so far is to create uncertainty for members, large extra costs for TfL and industrial action that will cost the exchequer much more than they can save. In a sensible world it would be quietly shelved.
Sadly, good sense is not a hallmark of the current government. Protecting our pensions is one aspect of our current dispute along with working conditions and agreements. While the announcements on March 17th was much more of a damp squib than a big bang, we will need to be ready to take action again to make sure any changes to any of these comes through agreement and negotiation.
We will contine to keep members updated as things develop.
ASLEF District Organiser.
The letter from the government to TfL is here.
The reply from TfL to the government is here.