Changes to the TfL Pension Fund will be required as part of a financial support package agreed between the government, Transport for London and the mayor of London, with a plan to be presented in September. But unions have rejected the deal, and warned that more strikes are “likely”.
The government, TfL, the mayor and the National Union of Rail, Maritime and Transport Workers have been at loggerheads for months over the scale of the government’s commitments to the underground network, and the conditions attached thereto.
Of particular focus has been the TfL Pension Scheme, and the review of the scheme by Sir Brendan Barber that the government mandated as part of a bailout package agreed in 2021.
Pension contributions cost TfL approximately £375mn a year, though this figure rose to £401mn in 2021.
A report commissioned by the mayor of London claimed that reforms could save as much as £100mn a year for the transport network, and the Barber review — in setting out and modelling four options for alternative scheme designs — produced savings of between £79.3mn and £182.4mn for alternative final salary options, and up to £154.4mn a year for career average revalued earnings schemes.
The new deal mandates TfL to set out a plan for pension reform options by September 30 and an implementation plan by January 31 2023, with the aim being to reduce future service liabilities by around £100mn as part of a broader plan to make the transport network sustainable.
Transport secretary Grant Shapps said: “For over two years now we’ve time and again shown our unwavering commitment to London and the transport network it depends on, but we have to be fair to taxpayers across the entire country.
“This deal more than delivers for Londoners and even matches the mayor’s own pre-pandemic spending plans. But for this to work the mayor must follow through on his promises to get TfL back on a steady financial footing, stop relying on government bailouts, and take responsibility for his actions. Now is the time to put politics to one side and get on with the job — Londoners depend on it.”
The deal and the pensions implications
The government made a “final offer” to TfL bosses in July, though the new deal is slightly more generous than that. The Department for Transport said it would support nearly £3.6bn of projects agreed with TfL and provide just under £1.2bn in funding, taking the total amount of government support above £6bn.
It said this would be sufficient to match London mayor Sadiq Khan’s pre-pandemic spending plans, protecting the network against potential hits to its revenue from continuing pandemic-related uncertainty, while also allowing for the delivery of a number of projects, including new Piccadilly Line trains, upgrades across a number of London Underground lines, repairs to Hammersmith Bridge, and the creation of an independent property company slated to build 20,000 homes on TfL land over the next 10 years.