Network Rail
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News Releases: National
NETWORK RAIL TO LAUNCH NEW PENSION SCHEME
Thursday 14 February 2008 11:00
A third pension scheme, widening the choice for its 34,000 employees, was unveiled today by Network Rail.
The pension scheme will be a defined benefit arrangement, based on the average of an employees earnings, known as Career Average Revalued Earnings (CARE). This new pension gives Network Rail employees a wide choice of pension options - the best in the rail industry. Employees will be able to choose from:
A defined contribution scheme - a type of private pension plan with employee contributions being flexible (from 0 to 4%)
The new defined benefit scheme based on average earnings with employee contributions of around 6%
The existing defined benefit scheme (Railway Pensions Scheme - RPS) based on final salary with employee contributions presently around 11% of pensionable pay
The move to introduce a new pension scheme follows a recent report from the Railway Pensions Commission that concluded that the existing industry wide defined benefit scheme could become unaffordable for all parties in the future and recommended that railway companies should seek to provide a more affordable defined benefit scheme.
Iain Coucher, Chief Executive, said: "This is about providing our employees with the very best options when making those difficult financial planning decisions. Pensions are very important to our people and we want to provide great pension choices that balance cost and benefits, enabling employees to make informed decisions about their future.
"Our new CARE scheme will give everyone another option when making retirement planning decisions, an option that is a good balance between cost to the individual and the benefits it pays out."
Notes to Editors:
Details of the scheme:
• The CARE scheme is a shared cost defined benefit scheme, with 60%of the cost met by the employer and 40% by employees
• Employee pension contributions are expected to be around 6% of basic pay. (The defined contribution scheme is between 0 and 4%, while the final salary scheme is currently 10.8% of pensionable pay, rising to 11.36% from January 2009
• The CARE scheme offers life assurance of 4x pensionable pay and dependants pensions on death in service, together with ill-health retirement benefits
• Benefits will be based on 1.25% of basic pay for each year in the scheme
• An employee paying into the scheme over a 40 year career could achieve a pension of 50% of their average basic salary from the age of 65
• The CARE scheme will be open to new employees from day one. Existing employees will have the option to switch to the CARE scheme
Railway Pensions Commission:
The results of the 2004 valuation of the Railway Pension Scheme created real concerns across the rail industry that costs were too high and becoming unsustainable. All parties (employers and trade unions) agreed that something had to be done and as a result the Railway Pensions Commission was set up jointly in September 2006.
The Commission's remit was to consider, against a background of rising costs of pension provision, what, if any, alternative means of long term pension provision might be available that would be fair and affordable for both employees and employers.
Sometimes the full picture isn't so rosey as a headline!