Government may take BR pensions
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Your support makes all the difference.THE Government is considering transferring between pounds 2.5bn and pounds 3.75bn from British Rail's pension funds to the Treasury in a move that would substantially improve public finances.
It has proposed the transfer of shares and other investments that would be earmarked to cover the pensions of retired railwaymen and those who have left BR but have yet to retire.
If the investments were turned into cash the money could be used to reduce the public sector borrowing requirement, expected to reach about pounds 50bn next year, boosted by the rising cost of unemployment benefits.
There would be a one-off benefit to the PSBR as the cash is realised and a continuing commitment to pay pensions to railwaymen for the rest of their lives.
Any inflow to the Treasury would relieve the financial markets, which are braced for an avalanche of pounds 1bn of new gilts each week, issued to fund the PSBR. If the inflow is large enough the gilt programme could be trimmed.
Reaction from some employees, unions and trustees was critical. Frank Field, the Labour MP for Birkenhead, said: 'The Government has slowly caught up with where Robert Maxwell was seven years ago. That was when he realised pension fund assets were worth more than companies.'
He said the proposal, set out in a consultative document, was 'the biggest U- turn yet and all for the sake of getting their hands on the cash. Until now the Government has been farming as much as possible out to the private sector. Now it is clawing it back.'
British Rail's pension funds - with pounds 8.5bn of assets - are run separately from the company and from the Government by a trust company. The assets of the 200,000 people who have already retired or who have left BR are intermingled with those of the 140,000 employees.
As part of the privatisation plan, the Government plans to split the fund. The document says that if the pensioners stayed in the same scheme as the employees of Railtrack - which is to take over responsibility for the network - and the BR Board, the scheme could become unstable. This is because there would be more pensioners receiving benefits than employees contributing to the scheme.
It proposes two options. In one, a portion of the assets would be set aside in a special scheme for pensioners, retaining its surplus but not receiving any government guarantees.
In the other, the money would be transferred to the Government, which would promise to increase pensions in line with the retail price index.
There was speculation that similar schemes could be devised for British Coal, the Post Office or even local authorities. One adviser to public sector schemes said: 'It gives me the heebie- jeebies.'
A spokeswoman for the Department of Trade and Industry said no decisions had been made in respect of British Coal, which awaits the end of the review. A spokesman for the Department of the Environment said there were no plans for transferring money from local authority pension funds to the Treasury.
It is estimated that about pounds 2.5bn to pounds 3.75bn of the British Rail pension funds' total assets of pounds 8.5bn relates to pensioners and those who have left BR but are yet to retire.
The main British Rail pension funds were in surplus - had more assets than they needed to pay promised pensions - when last valued. The next valuation is in April.
The document says recent changes to benefits and contributions are likely to have absorbed most of the 1990 surplus. BR pays no contributions to the funds and employees pay half the normal rates.
BR pensioners receive benefits in line with the industry norm except that part of some employees' pay is disregarded for pension purposes.
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