Will TfL pensions move to the LGPS?
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Transport for London could join the Local Government Pension Scheme, London’s interim transport commissioner Andy Lord has said, as the government is seeking reform of TfL's final salary scheme.
Lord made the statement on 17 March responding to the Department for Transport, which said it would be supportive of moving the whole TfL Pension Fund into an existing funded public sector scheme or a new or existing private sector scheme.
The interim transport commissioner identified the LGPS as the only existing funded public scheme that would be relevant for TfL, but listed practical issues that would need to be addressed if the government was to make the LGPS the home for TfL pensions, so that benefits could be mirrored and protected benefits maintained.
He added: "Without HMG’s detailed analysis, it remains our firm view that alternative potential approaches considered in the 14 October submission are likely to be capable of delivering better outcomes than moving to the LGPS when reviewed against all of the assessment criteria set out in the Funding Agreement and, therefore, should remain under consideration."
He added: "Without HMG’s detailed analysis, it remains our firm view that alternative potential approaches considered in the 14 October submission are likely to be capable of delivering better outcomes than moving to the LGPS when reviewed against all of the assessment criteria set out in the Funding Agreement and, therefore, should remain under consideration."
A TfL spokesperson said: “We’ve taken time to consider the government’s response and there remain several fundamental outstanding practical and technical matters related to deliverability, value for money and fairness, which will need to be resolved before any agreement can be reached.”
The spokesperson added: “We have therefore written to the government explaining that it is not possible to progress until they provide the necessary assurances and information we need. It remains the case that no changes to the TfL pension are currently being proposed.”
In the DfT’s letter, Emma Ward, director general, roads and local group, had said government was willing to use legislation for any TfL pension reform which “could cover moving TfL’s pension fund in its entirety (past service assets and liabilities, and future service provision) into an existing funded public sector scheme or into a new or existing private sector scheme”.
Ward added: “At this time, government is unable to support a transfer of liabilities into an unfunded arrangement or into a new funded public sector scheme.”
Despite this, Lord said he wants to keep other options for reform open, such as creating a new funded public sector scheme or ‘do nothing’, while ruling out private sector alternatives. He said the latter would not be feasible as the government was unwilling to provide funding or a crown guarantee.
The £14.4bn TfL Pension Fund had a small surplus at its 2021 triennial valuation, and the trustees expect it to remain in surplus this year.
Is the DB regime designed for closed schemes?
Spending decisions on potential changes to pension schemes lie with the Mayor and TfL, but the DfT made reforming TfL’s open final salary scheme a condition of a funding settlement in 2021 which demanded savings of £100m from future service accrual.
TfL criticised the demands in an October options paper, saying the main risks arise from past service benefits rather than future service, and asked for a crown guarantee or legislation to transfer past service benefits to a public sector scheme, considering it anomalous to treat its open pension scheme as a private sector arrangement.
In their responses to a call for evidence on defined benefit pensions by MPs, which closed on Tuesday, the Association of Consulting Actuaries and the Association of Professional Pension Trustees both stressed that the current trust-based regulatory framework is geared towards pension schemes that are closed and managing the risks this entails, rather than allowing open schemes to thrive.
Pensions remain a factor in tube worker strikes
The RMT union on Monday started re-balloting around 10,000 London Underground members for strike action over jobs and pensions, saying proposals for reforming the TfL Pension Fund have raised the prospect of tube workers losing over 30% of their pensions. The ballot will run until 23 May.
RMT general secretary Mick Lynch said: "Our members have taken several days of strike action over this last year and remain as determined as ever to get a just settlement on jobs, pensions and their working conditions.”
