STAGECOACH has revealed it was disqualified from bidding for three major rail franchises because it refused to pay more than £1 billion to cover liabilities on the Railway Pension Scheme (RPS).
The bus and rail giant was forced out of the running for the West Coast, East Midlands and South Eastern franchises after being told by the Department of Transport that it had submitted non-compliant bids.
The dispute centres on the level of risk the operator was expected to take on with regard to liabilities on the Railway Pension Scheme (RPS), the final salary defined benefit scheme which replaced the former British Rail Pension Scheme after the privatisation of British Rail.
Stagecoach hit back at the time, declaring that the UK Government was expecting private sector players to take on the material risks concerned although they could not control or manage them.
Chief executive Martin Griffiths said forcing operators to take on these risks could lead to the failure of more rail franchises.
Since privatisation, the extent of rail operators’ obligations to the RPS has been limited to paying employer contributions for the period of the franchise.
Now Stagecoach has revealed the costs it would have had to bear had it accepted the terms of the bidding process, estimating that the total additional cost and risk could be as much as £1.6bn over three franchises.
The company said: “In our bids, we refused to accept the potential pension risks that the Department for Transport requires operators to bear in relation to the three new franchises. The full extent of these risks is unknown, but we estimate them to be well in excess of £1 billion for the three franchises.”
Stagecoach said in the statement: “We understand that the Pensions Regulator considers there to be a deficit of up to £7.5 billion across the franchised train operators and is seeking significant additional contributions to the scheme which are as yet unquantified.”
After being ruled out of the East Midlands franchise bid, it emerged the contract had been taken on by Abellio. The Dutch operator has come in for repeated criticism for its performance on the ScotRail franchise in Scotland, which it took over in 2015.
Shares in Stagecoach closed up 1.6p at 135.1p.
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