03.05.19
Stagecoach says it was disqualified because it rejected £1.6bn rail pensions risk
Stagecoach has said it was disqualified from three rail franchise competitions because it refused to accept a pensions risk “well in excess of £1bn.”
The transport group has said projections offered by the DfT were “inadequate,” and in one scenario the company estimated it could have been left with pension liabilities of £1.6bn, including nearly £700m on the West Coast franchise alone.
In a statement to the stock market, Stagecoach listed the risks it said the DfT wanted train operators to take in new franchises, which included making up employees’ contributions if they refused to pay at an increased level.
It said that accepting the DfT’s position on pensions would “have been to take on unknowable risk and been contrary to the success of the company and also contrary to the interests of employees, customers and the franchise.”
This echoes Richard Branson who said “we can’t accept a risk we can’t manage – this would be reckless” as he warned that Virgin Trains, which was part of a joint franchise bid with Stagecoach, could disappear by the end of the year.
Last month, Stagecoach’s bids for the East Midlands, South Eastern and West Coast franchises were judged to be “non-compliant” as they breach pension rules, leading to a row over railway pensions.
The DfT said Stagecoach was “responsible for their own disqualification” and had “repeatedly ignored established rules,” but the Pensions Regulator warned that train operators face a pensions black hole of £7.5bn, and the RMT has threatened strike action over the deficit.
Stagecoach has now said there was an “absence of any contractual protection” for the rail franchises, and “as yet there has been no final determination by the Railway Pensions Scheme or regulator of the extend of the liability that would be borne by franchises.”
“While ultimately the DfT provided limited protection against the risk in the specification for the three current franchise competitions, our assessment was it still left the successful operators with substantial risk which could not be assessed.”
The Pensions Regulator said: “We are working closely with the scheme trustees, Rail Delivery Group and the Department for Transport to ensure the best possible outcome for pension scheme members.
“Part of this work is to ensure the scheme is adequately funded so that members receive the benefits they expect.”
Image credit - Peter ByrnePA WirePA Images