EMR - Pension clarity

[Training]

Hi everyone,

I hoping to join EMR as a depot driver soon. I have passed the processes involved and am just waiting for a start date. In the meantime I am doing some research around pensions for mainline drivers.

I can’t seem to find a clear forum thread that talks about what the pension for a mainline driver is and this is why I have come here to ask.

I think I am right in saying that mainline drivers are on a defined benefit, final salary scheme. Yet when I ring EMR to ask for details confirming the scheme, how much of the wage is contributed to pension, how much EMR puts in, nobody seems to know the answer.

I have rang the Rail Pension Service and asked them the same questions. They have said that the TOCs can sign drivers up to any number of schemes and so can’t tell me either!

I think I have gathered that EMR mainline drivers are defined benefit, final salary, paying 1/60th of their wage. And so if employed as a driver with them for say 20 years this would be correct at the moment:

£58300 final salary / 60 = 971.6 x 20 years employment = £19400 p/year pension. Am I correct? If I am how do I then work out what the lump sum would be?

Obviously the above doesn’t consider BRASS but just trying to do some basic maths and understand my potential future financial position.

Sorry if I have missed something obvious elsewhere guys and if anybody is able to reply with some clarity thank you every much in advance!

Any EMR drivers on here who don’t mind a PM with a few more w questions more generally please let me know!

Thanks for reading!

 

[whoosh]

Things have changed a lot since 2016.

In your calculation above, you would've needed to have taken away 1.5 times the state pension from your starting Mainline Driver salary figure. This is called 'Section Pay'.
That is how it used to be done before 2016, and was fairly simple.

Now though it's a lot more complicated.
It isn't final salary anymore - for anyone on the railway. This is despite many job adverts stating it is. It is Defined Benefit however.

As an example:

You start as a Trainee and do 1 year.
Then you are a Depot Driver and do 4 years.
Then you are a Mainline Driver and do 15 years.
Then you become a Driver Manager for 2 years and then retire after 22 years on the railway.

You used to get 22 years worth of pension at the Driver Manager rate (although remember you would need to deduct 1.5 times the state pension from this).

Now though, you'd get 22 years Trainee (your 'all service pensionable pay'), 21 years 'Pension Restructuring Premuim' for when you had the salary uplift to depot driver, 17 years 'Pension Restructuring Premium' for when you were a Mainline Driver, and 2 years 'Pension Restructuring Premium' for when you were a Driver Manager.
It isn't even as simple as that though, as if you ever have a payrise higher than RPI+0.25% (e.g. selling of Terms & Conditions/Productivity - there might be a good rise) then that generates another Pension Restructuring Premium for future service only.

Here is a guide to the Pension Restructuring Premiums, although I don't think it mentions the cap of RPI+0.25.

https://cdn.rpmi.co.uk/mp-sitefinity-prod/docs/default-source/rayn/guides-for-all-members/pay-restructuring.pdf?sfvrsn=8f4d4773_7

BRASS is worth considering, especially as it will convert £12 lump sum into £1 pension. In pretty much every other scheme it'll cost you £20 lump sum for £1 pension, so is worth looking at.
Remember that pension contributions come out of your gross salary and aren't subject to tax and if a 'Smart Pension' National Insurance as well.

I would guess that the employee contributions are somewhere between 8% and 11%. I'm not at EMR, but at my TOC I'm paying 8.something percent. The employer pays 1.5 times as much. This is for your basic company pension. For BRASS it's just you paying your extra additional contributions - you might hear about 'matching BRASS contributions', but these are capped and unavailable to anyone starting these days.

With regard to you contacting RPMI: The person will see a number of different percentages that can be deducted and these are for different rules that apply to different people e.g. new employees who can retire at 62, ex-BR who can still retire at 60 - there might be some who have more favourable terms with regard to early retirement who weren't ex-BR but goalposts have been moved. There are slightly different contribution rates, so unless your phonecall delves deeper and the person is more helpful and knowledgeable, it may be difficult to see at a glance which rate you'd pay.
There have also been Depot Drivers at Neville Hill depot in Leeds who were on different terms and conditions to Derby and Nottingham, who have relocated but may still be on their old contract, just to add to the complications!

If you're on Facebook, there's a group called 'UK Railway Pensions & State Pension Changes' which you may find helpful. You need to answer some questions to join it.

 

[Crazyb]

I'm not at EMT either, but the trainees that come into my company get put into another pension first called "Industry-Wide Defined Contribution Section" after 2 years they can move into the DB one.

As your coming in as a depot driver and not a trainee driver, you could come under the DB sections. Pension are a mine field for most, but as Whoosh said, most railway employees use the "UK Railway Pensions & State Pension Changes" on FB.

Most companies will send you out all your pension stuff with your starter pack, and that will give you a better idea....

If your speaking to HR within EMT regarding pensions, good luck with that....You will need to speak to your payroll....Any pension related questions, payroll can normally answer....Anything to do with Brass you will send payroll the paper work, if you decide to join in the future.

Pensions have changed radically for new starters, with different schemes, etc etc and all TOCs work differently.

I would to suggest and wait until you get your starter pack......If you don't get one, you normally have a company induction with EMT staff explaining your pay, pensions etc....If you don't get any of that...then once your in, speak to payroll.

Sorry I couldn't be more help, but try the FB page.

 

[Training]

I'm not at EMT either, but the trainees that come into my company get put into another pension first called "Industry-Wide Defined Contribution Section" after 2 years they can move into the DB one.

As your coming in as a depot driver and not a trainee driver, you could come under the DB sections. Pension are a mine field for most, but as Whoosh said, most railway employees use the "UK Railway Pensions & State Pension Changes" on FB.

Most companies will send you out all your pension stuff with your starter pack, and that will give you a better idea....

If your speaking to HR within EMT regarding pensions, good luck with that....You will need to speak to your payroll....Any pension related questions, payroll can normally answer....Anything to do with Brass you will send payroll the paper work, if you decide to join in the future.

Pensions have changed radically for new starters, with different schemes, etc etc and all TOCs work differently.

I would to suggest and wait until you get your starter pack......If you don't get one, you normally have a company induction with EMT staff explaining your pay, pensions etc....If you don't get any of that...then once your in, speak to payroll.

Sorry I couldn't be more help, but try the FB page.

Thanks for the replies. Wow it is hugely complicated isn’t it.

Is the pension scheme considered to be a good one at all? When compared to other industry I mean? Or are train drivers retiring and finding that they actually don’t have a lot of money to then live off?

Given the typical figures that were talked about above is it possible to talk in general terms around how much a 22 year or so career would return on a pension? Just to have a ball park understanding at least?

I was under the impression that BRASS was a separate pot invested separately to the pension but provided as a lump sum at the same time as the pension is drawn. Am I correct?

I will take a look at the FB page too. Thank you again for replies so far and taking time to explain.

 

[Horizon22]

Thanks for the replies. Wow it is hugely complicated isn’t it.

Is the pension scheme considered to be a good one at all? When compared to other industry I mean? Or are train drivers retiring and finding that they actually don’t have a lot of money to then live off?

Given the typical figures that were talked about above is it possible to talk in general terms around how much a 22 year or so career would return on a pension? Just to have a ball park understanding at least?

I was under the impression that BRASS was a separate pot invested separately to the pension but provided as a lump sum at the same time as the pension is drawn. Am I correct?

I will take a look at the FB page too. Thank you again for replies so far and taking time to explain.

Yes it is still considered one of the best pension schemes of any industries, even if it is worse than it once was. Some drivers retiring now are under old BR terms which were better and have lived through a substantial uplift in salary increases since privitisation so I doubt they'll have issues. Obviously some drivers have joined in their 40s and 50s so less time in the grade might mean they've accumulated as much.

BRASS is separate and would appear as a separate line on your pay slip.

 

[jfollows]

I was under the impression that BRASS was a separate pot invested separately to the pension but provided as a lump sum at the same time as the pension is drawn. Am I correct?

BRASS is a separate Additional Voluntary Contribution (AVC) Defined Contribution (DC) scheme. Its accumulated pension can be taken as an annuity in due course, or drawn down over a period of time, or transferred to a different DC scheme. It will be subject to similar rules to other DC schemes, so 25% can be taken as a tax-free lump sum, but the remaining 75% will be subject to tax however it is taken. You are right that it's invested separately, and you have some control over the way in which this is done.

 

[Training]

Just adding something else to the mix…

This Telegraph article published in January 2033 talks about the rail sector having generous pension payouts. It essentially states that a driver finishing on £55,000 who has worked for 30 years would be entitled to a £22,000 per year and a lump sum of… just £33,000.

Does this sound right? That seems massively low to me when compared to other sectors. The police for example I believe get up to and over £200,000 depending on rank at retirement.

Interested to hear what people think about this example?

No one wants taxpayers to know how generous rail pensions really are

The dysfunctional rail system can only be fixed if rail pensions are also sorted out

www.telegraph.co.uk

 

[jfollows]

Just adding something else to the mix…

This Telegraph article published in January 2033 talks about the rail sector having generous pension payouts. It essentially states that a driver finishing on £55,000 who has worked for 30 years would be entitled to a £22,000 per year and a lump sum of… just £33,000.

Does this sound right? That seems massively low to me when compared to other sectors. The police for example I believe get up to and over £200,000 depending on rank at retirement.

Interested to hear what people think about this example?

No one wants taxpayers to know how generous rail pensions really are

The dysfunctional rail system can only be fixed if rail pensions are also sorted out

www.telegraph.co.uk

Your Telegraph article is behind a "paywall", can you please quote it directly here?

 

[Horizon22]

Just adding something else to the mix…

This Telegraph article published in January 2033 talks about the rail sector having generous pension payouts. It essentially states that a driver finishing on £55,000 who has worked for 30 years would be entitled to a £22,000 per year and a lump sum of… just £33,000.

Does this sound right? That seems massively low to me when compared to other sectors. The police for example I believe get up to and over £200,000 depending on rank at retirement.

Interested to hear what people think about this example?

No one wants taxpayers to know how generous rail pensions really are

The dysfunctional rail system can only be fixed if rail pensions are also sorted out

www.telegraph.co.uk

No it doesn't sound right, however the article is behind a paywall so we'd need the relevant section quoted.

 

[Training]

Thanks for the quick replies again. Article in full is:

Although unions have been locked in a bitter dispute with government and rail companies for months, over pay, job cuts and changes to terms and conditions, we haven’t heard much about pensions. Perhaps this is because no one wants passengers and taxpayers to know how generous rail pensions really are?

Pensions for train operating company staff are still based on final salary, and most still have a retirement age of 60. Even public sector pensions are now based on career average salaries, with a higher retirement age.

The average salary for a train driver with 10-20 years experience is reported to be £55,000, so a driver retiring at 60 with 30 years pension would get an average inflation-linked pension of £22,000, plus a £33,000 cash lump sum.

Train company accounts show the annual cost of new pension promises is around 60pc of salary – a huge part of overall pay – even after employee contributions.

Rail pensions have a unique “cost sharing” arrangement, with all regular and deficit cash contributions split 60/40 between employers and employees, which may explain the reluctance to increase annual cash contributions.

Each train operating company is part of the Railways Pension Scheme (RPS), set up at privatisation in 1994. It is an industry-wide scheme with over 100 legally separate sections, including Network Rail, and freight, engineering and maintenance companies. At privatisation, all pensioners and deferred members were transferred to a new section with a “crown guarantee” underwritten by taxpayers.

RPS is one of the UK’s largest pension schemes, with £37bn of assets at December 2021, and 350,000 members, including 100,000 current employees.

Each RPS section has a three-year valuation but the December 2016 valuation for train operating companies have still not been agreed with the Pensions Regulator, way, way beyond the legal deadline.

Although the established rail franchising rules mean train operating companies must pay cash contributions over the life of a franchise, they have no liability for a deficit when the franchise ends. The deficit is simply passed on to the next company taking over the franchise, in a game of pass-the-parcel. If no one is prepared to take on the franchise, it reverts to the Government.

The latest accounts for each of the train operating companies show the combined pension deficit is around £8bn.

We know the effective re-nationalisation of the train operators in 2020 means all the industry’s annual losses are paid by taxpayers. But re-nationalisation also means taxpayers are on the hook for the pension deficit, which has been hidden from taxpayers.

The dysfunctional rail system can only be sorted out if rail pensions are also sorted out. Despite the threat of further strikes, this means closing the expensive and risky defined benefit pension and moving to defined contribution. The good news for rail staff is that some of the cost savings can be used to increase monthly pay.

Defined contributions would still leave the £8bn deficit to be paid, partly through higher fares, but with taxpayers left picking up most of the bill.

---

John Ralfe is an independent pensions consultant and has advised the work and pensions select committee

 

[greatkingrat]

BRASS is a separate Additional Voluntary Contribution (AVC) Defined Contribution (DC) scheme. Its accumulated pension can be taken as an annuity in due course, or drawn down over a period of time, or transferred to a different DC scheme. It will be subject to similar rules to other DC schemes, so 25% can be taken as a tax-free lump sum, but the remaining 75% will be subject to tax however it is taken. You are right that it's invested separately, and you have some control over the way in which this is done.

That is completely wrong. For most people the whole of their BRASS fund will be paid out as a tax-free lump sum (unless the fund is very large), you don't get a pension or annuity as such from BRASS.

 

[Crazyb]

Thanks for the replies. Wow it is hugely complicated isn’t it.

Is the pension scheme considered to be a good one at all? When compared to other industry I mean? Or are train drivers retiring and finding that they actually don’t have a lot of money to then live off?

Given the typical figures that were talked about above is it possible to talk in general terms around how much a 22 year or so career would return on a pension? Just to have a ball park understanding at least?

I was under the impression that BRASS was a separate pot invested separately to the pension but provided as a lump sum at the same time as the pension is drawn. Am I correct?

I will take a look at the FB page too. Thank you again for replies so far and taking time to explain.

As mentioned above, yes the railway pension is very good, though maybe a bit volatile under the current climate., but if you have 22 years, I wouldn't worry......

I come under the old BR pension scheme and mine is totally different to yours.

When it comes to Brass, Ive been in it for 38 years, and it's the best thing I have done.....Though my funds are taking a hit due to Putin, so i need someone to take a hit on him!!!!!

When you join Brass, it will come out your salary as with your railway pension before tax, and most drivers are on 40%, so that's one saving....Most of the young guys at my place pay Brass, and if you want to pay less, just fill in a form and reduce it, or you want to pay more, you can up it.

If you join Brass, there are also different funds you can join, deposit fund just ticks over and Globe funds are the high risk, there a few there you can look at.

I'm not 100% on this, but some newbies have transferred their old company pensions in, but there is something about buying in years.

Its all a mine field...lol......But what I would suggest is not to worry too much. See what you get as info and then once settled, look into Brass if you can afford it.....I think the min was £5 per week, the max you would need to ask your payroll.

If you do share a mess room with other drivers, get some info.....They will be happy to point you in the right direction.

Anyway, welcome to the railway world, and just remember....The railway runs on rumours..lol

 

[jfollows]

That is completely wrong. For most people the whole of their BRASS fund will be paid out as a tax-free lump sum (unless the fund is very large), you don't get a pension or annuity as such from BRASS.

Thanks for correcting me, apologies for inaccurate post.

 

[whoosh]

I wouldn't place too much faith in the so called pensions expert from the Telegraph. He keeps saying we are on a final salary pension when we aren't! He keeps saying we retire at 60, when most of us don't.


Yes it is considered a good scheme.

I need to clarify about BRASS. BRASS is a separate pot that can be invested in different funds.
The point I was making is that with paying into BRASS you can make BRASS earn you a lump sum which can replace the lump sum part of your regular railway pension.
You can then convert that to yearly pension by swapping £12 of lump sum from your regular railway pension and turn it into £1 of yearly pension - so you end up with a better pension.

So, you can go for the 'minimum lump sum/ maximum pension' option with your regular railway pension (at a very good conversion rate), but you'd now still have a lump sum with your BRASS money.


I don't know if you'll be on a lower Trainee rate of pay when you start, but if you are then when you go to full Depot Driver rate that is a good time to increase your BRASS contributions if you want to make any, as you won't notice them missing from your take home pay.

The same advice would apply to a pay jump from Depot Driver to Mainline Driver - that's a good time to up BRASS contributions. If the money is never in your take home pay, then you won't miss it. If you leave it a few months and get used to it being paid into your bank, then it would be take home pay you'd miss and maybe be reluctant to sacrifice, if you looked at upping contributions later on.

You can pay a maximum of 20% of your salary into BRASS and your regular railway pension in total. (OR 15% of your total earnings if you work loads of overtime.)

 

[JonathanH]

Does this sound right? That seems massively low to me when compared to other sectors. The police for example I believe get up to and over £200,000 depending on rank at retirement.

You shouldn't confuse value with amount.

A pension worth £200,000 is very different to a pension of £20,000 a year.

A pension of £20,000 a year is worth more than a fund of £200,000, when assessed at retirement.

Even with the conversion terms of 12 to 1 mentioned above, £200,000 doesn't buy a pension of £20,000 a year.

 

[Frankie4763]

I wouldn't place too much faith in the so called pensions expert from the Telegraph. He keeps saying we are on a final salary pension when we aren't! He keeps saying we retire at 60, when most of us don't.


Yes it is considered a good scheme.

I need to clarify about BRASS. BRASS is a separate pot that can be invested in different funds.
The point I was making is that with paying into BRASS you can make BRASS earn you a lump sum which can replace the lump sum part of your regular railway pension.
You can then convert that to yearly pension by swapping £12 of lump sum from your regular railway pension and turn it into £1 of yearly pension - so you end up with a better pension.

So, you can go for the 'minimum lump sum/ maximum pension' option with your regular railway pension (at a very good conversion rate), but you'd now still have a lump sum with your BRASS money.


I don't know if you'll be on a lower Trainee rate of pay when you start, but if you are then when you go to full Depot Driver rate that is a good time to increase your BRASS contributions if you want to make any, as you won't notice them missing from your take home pay.

The same advice would apply to a pay jump from Depot Driver to Mainline Driver - that's a good time to up BRASS contributions. If the money is never in your take home pay, then you won't miss it. If you leave it a few months and get used to it being paid into your bank, then it would be take home pay you'd miss and maybe be reluctant to sacrifice, if you looked at upping contributions later on.

You can pay a maximum of 20% of your salary into BRASS and your regular railway pension in total. (OR 15% of your total earnings if you work loads of overtime.)

Out of interest, what age do most drivers retire?

 

[dctraindriver]

You shouldn't confuse value with amount.

A pension worth £200,000 is very different to a pension of £20,000 a year.

A pension of £20,000 a year is worth more than a fund of £200,000, when assessed at retirement.

Even with the conversion terms of 12 to 1 mentioned above, £200,000 doesn't buy a pension of £20,000 a year.

The OP is talking about a £200,000 lump sum not a £200,000 pension pot.

 

[JonathanH]

The OP is talking about a £200,000 lump sum not a £200,000 pension pot.

Ah, that makes more sense.

Well the option is there to increase the lump sum by commuting pension, but there the 12 to 1 terms work in a less favourable way than for conversion of lump sum to pension.

The maximum lump sum with a pension of £22,000 and scheme lump sum of £33,000 would be about £106,071, with the pension reducing to £15,910 as a result.

 

[Training]

More helpful replies - thanks everyone.

The pension I referenced earlier is - I think - £200,000 lump sum and also £35k per year. Is that still considered better value than a £20k train pension and an unknown lump sum? Perhaps difficult to answer that.

I worked out the other day that if I paid approx £200 per 13 weeks that would be approx £52k or so after 20 years. I don’t know what the general return is for a BRASS and I appreciate that this perhaps also is largely dependent on how it is invested and how those investments return. But average - is there a general consensus of what x invested money returns as a total payout? Or some examples of members who can share their experiences of this?

 

[43066]

I worked out the other day that if I paid approx £200 per 13 weeks that would be approx £52k or so after 20 years. I don’t know what the general return is for a BRASS and I appreciate that this perhaps also is largely dependent on how it is invested and how those investments return. But average - is there a general consensus of what x invested money returns as a total payout? Or some examples of members who can share their experiences of this?

The difficulty with this is that people retiring now will have been on different Ts and Cs than you will be over the next thirty years. Many will be ex BR who had more favourable pension arrangements.

The pension scheme provides regular benefit statements which tell you what you would receive at current prices, assuming you continue making contributions until retirement age (obviously the actual figures you retire onto will be higher due to inflation).

 

[Snow1964]

That is completely wrong. For most people the whole of their BRASS fund will be paid out as a tax-free lump sum (unless the fund is very large), you don't get a pension or annuity as such from BRASS.

Legally (under pension tax rules) the tax free lump sum is a maximum of 25% of the value of the pension pot.

Some schemes might have different maxes less than 25%.

For defined benefit schemes the pension pot value is calculated as 20 times what you would get each year if didn't take any lump sum.

When I retired (early) my monthly pension was reduced by the value of the lump sum based on 17 years. ie Lump sum, divided by 17, divided by 12 months exactly equalled the reduced amount from the pension with no lump sum. I figured nice to have now and modernise the house, and when I get to 67 will get about £200/week extra when State pension kicks in.

The references above to 2016 were when State pension was replaced by new State scheme and contracting out stopped. For new state pension need 35 years qualifying NI (nearer 39 years if many years were contracted out). Just check your State pension forecast on Gov.uk but note that need to pay missing or part years by July if they are more than 6 years old (has been extended few months as the NI phone helpline that issues the 18 digit payment ref is struggling). If you have part years, might only need to pay few hundred pounds to get about £5000 extra pension for each part year. (£5000 is estimate, based on about £5 extra per week for each extra year, assuming typical 18 years living from age 67)

 

[whoosh]

Out of interest, what age do most drivers retire?

The Railway Pension Scheme was changed from retirement at 60 to retirement at 62 in 2016, although some (mostly ex-BR) retain the arrangements to retire at 60.
It was also changed - for everybody, ex-BR or not - from a final salary scheme to career average, at the same time.
I believe there were also changes to early retirement factors to make them less favourable.

These changes were in response to the ending of the Second State Pension, and the "opting out" of which many workplace pension schemes (including the railway) took part in, which included paying less National Insurance contributions.
When the Second State Pension was abolished, National Insurance contributions increased for employees, and even more so for employers, and these changes were made to reduce the cost of the workplace pension to railway employers to absorb that extra NI cost to them.


So 62 is the answer to your question, although a full railway pension is based on 40 years. Some people join the railway much later in life now.

Some retire early, and some later. And some go onto 'job share' reduced hours to wean themselves off working!

 

[JonathanH]

It was also changed - for everybody, ex-BR or not - from a final salary scheme to career average, at the same time.

More accurately it is somewhere between the two. The past service pensionable pay cap means that a member who stays in the same role and gets pay increases below the cap is still pensioned on 'final salary'.

Typical career average schemes apply inflationary increases based on a published index rather than an individual's capped pay increases.

 

[whoosh]

More accurately it is somewhere between the two. The past service pensionable pay cap means that a member who stays in the same role and gets pay increases below the cap is still pensioned on 'final salary'.

Typical career average schemes apply inflationary increases based on a published index rather than an individual's capped pay increases.

Yes, that is correct. It's a bit hard to explain, but I think you've nailed it.

 

[Frankie4763]

The Railway Pension Scheme was changed from retirement at 60 to retirement at 62 in 2016, although some (mostly ex-BR) retain the arrangements to retire at 60.
It was also changed - for everybody, ex-BR or not - from a final salary scheme to career average, at the same time.
I believe there were also changes to early retirement factors to make them less favourable.

These changes were in response to the ending of the Second State Pension, and the "opting out" of which many workplace pension schemes (including the railway) took part in, which included paying less National Insurance contributions.
When the Second State Pension was abolished, National Insurance contributions increased for employees, and even more so for employers, and these changes were made to reduce the cost of the workplace pension to railway employers to absorb that extra NI cost to them.


So 62 is the answer to your question, although a full railway pension is based on 40 years. Some people join the railway much later in life now.

Some retire early, and some later. And some go onto 'job share' reduced hours to wean themselves off working!

Thank you for your detailed reply

 

[Efini92]

I believe there were also changes to early retirement factors to make them less favourable.

There was but it only affected the part of the pension that had been paid into after 2016.
I seem to remember it being about 30% loss if you took early retirement at 58. Which isn’t so bad if you retired in 2017. But if you retire in 2046 it’s massive hit.