BR pension fund 'could be used to aid buy-out'
The BR pension fund is one of the largest in Britain with pounds 6.7bn worth of funds and is assessed to be almost a quarter over-funded, which means that its assets are considerably more than is required to pay its pensioners. This enables BR to have a 'contributions holiday', currently worth pounds 100m a year to BR, which last year made a loss of pounds 145m.
According to a document leaked to the Independent, the surplus could be used to pay redundancies which would make management buy-outs more viable. BR has already announced a programme of 5,000 redundancies among its 133,000 staff and further redundancies are expected.
The document is part of a presentation to senior managers who attended one of a series of 35 'MBO seminars' held around the country to encourage them to put in bids.
The document says: 'The pension fund surpluses could be used to aid the funding of a redundancy programme prior to privatisation.' It continues by saying that 'this had been used effectively in the restructuring of the Northern Ireland power stations'. The province's power stations were privatised this year through a trade sale that raised pounds 350m.
With few private companies interested in taking over BR's routes, which are due to be privatised from April 1994, the Government sees a management buy-out as its main hope. To encourage them, John MacGregor, Secretary of State for Transport, has agreed that BR staff would get 85 per cent of the cost of any bid up to pounds 10,000 and 75 per cent of the costs of the remainder up to pounds 100,000, a total of up to pounds 76,000.
A BR spokesman said: 'This document was not part of our presentation. Our view is that it would not be possible to use the pension fund surplus in this way.' The document is thought to have been prepared by the accountants Price Waterhouse, which has been giving briefings at the seminars. Price Waterhouse would not comment.
The Government has promised that staff transferred to franchisees would retain their terms and conditions. However, the document suggests that pension terms are likely to be reduced to those 'comparable in the private sector' and the costs of this would have to be met by the franchisees.
Lew Adams, assistant general secretary of the rail union Aslef, said: 'We now have evidence that BR is more interested in making money out of its pension fund than its need to provide a railway service.'
The use of the pension fund surplus caused BR trouble earlier this year. When BR started its pensions holiday it backdated it to the start of the financial year in April 1991. In fact, such a clawback is not allowed under trust law and BR was told to repay pounds 25m to the pension fund. However, it is repaying the money during the current year, which means that in fact BR made a loss last year of pounds 25m more than its accounts indicate.
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