Newsbrief No 51
Contents: 10th July 2003
1. Budget 2003 - Pension Increases.
2. Clause 24 - Complaint.
3. Valuation 2000.
4. Captain Cliff Alabaster.
5. Changes of Circumstance - Notification.
6. ABAP Database.
1. Budget 2003 - Pension Increases.
In our last Newsbrief we asked you to write to your MP regarding the statement made by the Chancellor of the Exchequer on the proposal to consider using HCIP. Thank you to those of you who did so, and thank you for the copies of the replies.
It is interesting to note that on 14th April 2003, in response to questions on this subject the Parliamentary Under-Secretary of State twice refused to rule out using HCIP for benefits up rating. On the same day the Government refused to give an answer on this question to the Shadow Chancellor. However the good news is that in a response to one of the MPs, Paul Boateng MP, writing from HM Treasury, stated " In his statement on EMU on Monday 9th June, the Chancellor said he intended to change the inflation target to one set on consumer prices (HICP) definition. He also confirmed that pensions & benefits and index linked gilts would be calculated on exactly the same basis as now." So thank you for all your efforts. We shall of course keep this under review.
2. Clause 24 - Complaint.
As you are aware the Deputy Chairman, Roy Hutchings has used the APS Internal Disputes Procedure to process his complaint concerning the legality of Clause 24 ( employers power of augmentation, without payment, if the actuary so advises ). The Trustees rejected his complaint last year. The complaint has now been submitted to the Pensions Ombudsman who has advised that he has provisionally accepted it, subject to reviewing his decision following receipt of responses to the application from the Parties involved. We shall keep you advised.
3. Valuation 2000.
We have had a considerable exchange of letters with the Chairman of APS Trustees, in relation to the use of part of the certified "disposable surplus" of £150m. for Clause 24 costs incurred by the Employers use of this Clause. The Actuary advised the Trustees that the cost could be offset against the Employers suspension of contributions for 4 years. Once the "disposable surplus" is certified by the Actuary, the Trustees (under Clause11) must make a scheme to "dispose of the disposable surplus". In our opinion there is an important issue of principle at the heart of this argument, one that effects the security of APS. Clause 11 (d) (ii) is mandatory, the Trustees have no discretion, the First Charge on the "disposable surplus " is to provide for the suspension of the Employers contribution for a period of up to 30 years. This in effect reduces the amount of the Employer future service liabilities.
In Valuation 2000 the Actuary clearly stated the period of suspension would be 4 years. In the Appeal Court Hearing it was revealed that the full cost of the Employer future service liabilities was £328m. The purpose of Clause 11 (d) (ii) is to ensure that the Employer liabilities are met, before any surplus left is allocated for any other purposes. It means in effect that the surplus must remain in the Scheme and is not spent. As the Appeal Court Judgement pointed out, Actuarial surplus is volatile and can be here today and gone to morrow. As we have seen in the recent drop in the value of equities. We have contended that in using part of the disposable surplus, the Trustees (with the exception of the 2 Pensioner Elected Trustees) have breached Clause 11. The Trustees, the Actuary, and their legal advisers contend that under the High Court decision they are correct in their actions.
We asked the Chairman of Trustees to agree that in view of the long running correspondence, the Trustees should agree that we need not use the Internal Disputes Resolution Procedure. In a letter dated 19th May 2003 he agreed. However, in a further letter 2nd June 2003 he stated" The Trustees have duty to preserve the assets of the Scheme and this includes taking reasonable steps to avoid unnecessary expenditure on legal matters. We are advised that we should try to minimise any further expenditure on this issue. if you decide to pursue it, we will seek to persuade the Ombudsman to dispose of it as expeditiously as possible. This will include inviting the Ombudsman to decline to investigate the issue having regard to its academic and inconsequential nature".
An amazing statement, considering the amount of APS funds that have spent in the flawed Merger proposal. For which, strangely enough, Mr Walker was the prime BA official responsible in his then capacity as Director of Human Resource. We have reminded the chairman of APS Trustees of this fact and that the Merger proposal and the subsequent reference to the Courts seeking an interpretation of Clause 11 cost APS £4,853,342.00 of which approximately half was related to costs of the proposed Merger. We welcome this late conversion to controlling costs. It is just a pity it only ever seems to be directed at the Beneficiaries. We intend to pursue this matter.
4. Captain Cliff Alabaster.
Cliff Alabaster has been forced to stand down as an ABAP Committee Member due to a current lack of mobility. We wish him a full recovery in due course. He has been a Committee Member since ABAP was founded in 1989. We thank him most sincerely for his sterling services to ABAP. There is now an opportunity for a likely Member to come forward and serve on the Committee.
5. Changes of Circumstance - Notification.
Members are reminded that BA, due to the restrictions of the Data Protection Act, does not pass on to the Association any change in Pensioners details such as change of address or bereavement. Therefore should Members have any changes to report please send them to the ABAP Membership Secretary.
6. ABAP Database.
The new arrangements are progressing. We thank Members for their patience as the odd glitch comes to light from previous data. Please add your e mail address to your subscription form as an additional cross check, even if you have previously sent it in.
The Committee of ABAP 10th July 2003.