BR pension fund 'could be used to aid buy-out'

BRITISH Rail is being advised to use surpluses from its pension funds to pay for redundancies, clearing the way for managers to buy out parts of the network when BR is privatised.

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.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea