Strike threat as FirstGroup tackles DB liabilities
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The RMT union is balloting its members on strike action as transport operator FirstGroup is set to close the Hull Trains section of the Railways Pension Scheme to accrual, moving 70 members to a defined contribution scheme. The group also plans to pay £336m into its main defined benefit schemes to bring them to a low dependency position.
FirstGroup said last week that it has agreed to sell US and Canada-based First Student and First Transit to EQT Infrastructure for $4.6bn, leading to net proceeds of about £2.2bn. The bus and rail operator is planning to use part of this to put its main UK pension schemes on a better footing.
But the National Union of Rail, Maritime and Transport Workers has criticised the group’s plan to close the well-funded Hull Trains section in the RPS to accrual while paying shareholders a £365m dividend.
“Rather than lining the pockets of its private investors, First Group should recognise the essential role undertaken by its staff and withdraw all attacks on its workers’ pay and conditions, including the attack on pensions at Hull trains,” said RMT general secretary Mick Cash.
A spokesperson for the RMT said that “management have taken the unjust decision to close the section for future accrual” despite the good funding position. “The RMT have had no choice but to ballot its members for industrial action in defence of their future pension rights,” the spokesperson added.
Company cites future growth in liability
A spokesperson for FirstGroup admitted the section showed a 99% actuarial funding level, but said that “this measure of the funding level assumes high levels of investment growth and risk”.
Following the closure of the section, the company plans to work with the trustee to establish a journey plan to low dependency, the spokesperson added.
“Without closure, the liabilities would have continued to grow at an exponential rate, exposing Hull Trains to risk that it cannot afford, and putting members’ benefits at risk,” they said. Hull Trains is an ‘open access’ operator, meaning its income is wholly reliant on ticket sales. It has seen a drop in passenger numbers during the pandemic.
Members in the Hull Trains section will now join a DC scheme with joint contributions of up to 22.5% of salary.
Main scheme receives cash after loss of guarantee
FirstGroup will contribute £336m to the First UK Bus Pension Scheme and the FirstGroup Pension Scheme, “to address the UK Bus pension scheme deficit and move it to a low dependency position, recognising its funding plans had relied on a parent company guarantee supported in part by First Student and Transit earnings”, the company spokesperson said.
Of the sum paid to the two UK schemes, £220m in cash will go to the First UK Bus Pension Scheme, with a further £95m held in escrow, also with the aim of getting the scheme to a low dependency funding position.
Another £21m will be paid into an escrow account for the FirstGroup Pension Scheme, which had an actuarial deficit of £19m in April last year. The scheme is moving its assets into bonds, triggered by the funding level. Although the trustee has not ruled out a buyout, the company said there are no immediate plans for one.
