Pandemic Causes Railway Pension to Leave Taxpayers Shouldering £8 Billion Deficit

Consumer demand for the UK’s transportation network has fallen significantly due to the coronavirus, prompting the country’s government to nationalize the system, including its pension.

The pension system was originally held in the private sector, but the government’s takeover of the rail network includes ownership and responsibility for the governance of the pension fund and tackling its funding issues. Deficit funding contributions were previously paid into the pension by members and employers.

Now the beleaguered £29 billion ($36 billion) pension is left with an £8 billion deficit that the government may leave up to the taxpayers to fund, according to the Telegraph.

The government stated that nationalizing the railway network would lead to the most positive outcome as the coronavirus situation evolved. “Allowing operators to enter insolvency would cause significantly more disruption to passengers and higher costs to the taxpayer,” the Department for Transport said in a statement.

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The Telegraph quoted the criticism of pension consultant John Ralfe: “In March 2018, the total train company deficit was £5 billion—much more than the ‘official’ deficit—and it will be around £8 billion today, given falls in stock markets,” Ralfe said. “The government must be entirely honest about the hidden cost of rail ‘renationalization,’ with taxpayers taking on the huge deficits in all the train company pension schemes.”

“These are unprecedented times and the rail network is central to our national resilience,” Rail Minister Chris Heaton-Harris said in a statement. “We are taking decisive action across the board to ensure vital rail services continue, allowing those people who cannot work at home to get to work.”

The funding troubles that the railway pension faces may soon be seen by other institutional investors with significant exposures to global equity markets. Moody’s recently reported that US public pensions lost $1 trillion as a result of the heavy market volatility caused by the pandemic, and Fitch noted that the crisis is “crushing” global GDP growth. S&P Global forecast a global recession later this year.