Question to the Department for Transport:

To ask the Secretary of State for Transport, whether the current east midlands trains franchise was the first one to require bidders to cover pension costs.

The Railways Pension Scheme was established in 1994, replacing the previous British Rail scheme. Contributions in to the Railways Pension Scheme are split according to a shared cost arrangement, whereby employers (the Train Operating Companies) pay 60% and employees pay the remaining 40%. Train Operating Companies are and continue to be responsible for paying employer pension contributions during a franchise term, and in the vast majority of franchises, have been on full risk for changes to those contributions during their franchise term since the Railways Pension Scheme was established.

In the new East Midlands franchise, the operator is exposed to no additional risks or demands when compared to current franchisees. Indeed, the new franchise includes a risk sharing mechanism with the government, which reduces the risk that the operator will be exposed to. In this, the operator retains the risks that it is able to manage, which are the contributions which cover employee’s pension rights arising from future service.