MPs demand action from pensions regulator over 'staggering' deficit in rail sector

Alexandra Rogers
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Sir Richard Branson said Virgin Trains could disappear from the UK as soon as November (Source: Getty)

The Pensions Regulator (TPR) has been asked to come clean on the extent of the rail sector's pensions deficit after the issue was brought to a head with the government's decision to ban Stagecoach from bidding for three franchises.

MPs on the Committee for Work and Pensions wrote to TPR chief executive Charles Counsell last week to demand he state how the watchdog aims to tackle the shortfall, which is estimated to be between £5bn-£6bn.

In the letter, former Labour MP and committee chair Frank Field said the government's decision to disqualify Stagecoach from the West Coast, South Eastern and East Midlands franchises for failing to share pension liabilities with the Department for Transport (DfT) sent "a clear message to the industry".

Read more: Stagecoach barred from rail bids because of 'pensions risk'

However, he said the "substantial deficit in the railways pensions scheme ... surely requires an urgent solution".

Field said: “While the staggering, parlous state of the railways pension scheme is anything but welcome, the one positive here is the clear signal from government to industry of further, heavy consequences for so badly mismanaging a pension scheme.

“In the wake of Carillion it is encouraging to see government now taking public service provider pension schemes more seriously. Today we’ve written to TPR to see what they’ve done so far with this mess, and what the threat of further action by them can achieve to protect pensioners.”

The DfT decision prompted outrage from Sir Richard Branson, whose Virgin Trains is 49 per cent owned by Stagecoach.

The tycoon said he was "devastated" and "baffled" by the decision.

"We can’t accept a risk we can’t manage – this would have been reckless," he said in a blog post. "This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more franchises."

Read more: Stagecoach threatens legal action over franchise bid decision

Yesterday Stagecoach said it had written to the DfT demanding an explanation, with the exchange likely to precede legal action. The DfT has until 4pm today to reply.

Virgin Trains is also considering taking legal action against the DfT.