Newsbrief 63
28thMarch2006.
Contents: 1. BA proposed changes to NAPS.
2. ABAP comment on proposed NAPS changes.
3. Scheme Valuation 2006: Funding Plans
4. Variable Pension :Update
5. AVCs : Update.
6. ABAP Members holding BA shares.
7. Pensioner Trustees: Payment.
8. Date of ABAP AGM 2006: For Your Diary.
9. Pensioner Staff Travel :Contact Update.
10. ABAP Treasurer.
11. Treasurers Corner.
12. Membership Secretary: Contact Amendment.
- BA Proposed Changes to NAPS.
The press announcement is as follows:
“BA plc will pay £500m. into NAPS as part of an effort to clear a £1Bn deficit.
BA plans to keep a final salary scheme with NO changes to pension benefits and NO increase in staff contribution rates.
For dealing with the NAPS deficit the proposals are:
Raising the Normal Retirement Age (NRA)
A slower Accrual Rate
Pensionable Pay Increases no more than inflation.
Pension Increases after retirement to be capped at 2.5%
Company & Staff will share the impact of changes in Life Expectancy.
These changes are necessary to clear the past deficit and contain the amount of future funding needed, said Willie Walsh Chief Executive. It means working longer to get a similar annual pension, but one that is more secure. This should address the Pension Problem at BA once and for all he added.
After the changes are accepted the Airline will make the £500m payment into the Pension Fund. This is on top of the £350m. it will have paid by December 2006.
The changes to Members future benefits will reduce the anticipated deficit said Walsh.
We will also be able to make contributions for future service we can afford.
This package of measures is vital if we are to achieve a competitive cost base,
deliver 10% operating margin, and invest in our future.
Details:
- NRA (Normal Retirement Age) will rise to 65 to coincide with Age legislation expected to be introduced in UK in October 2006.
- Current compulsory retirement age for Pilots & Cabin crew is currently 55, the NRA is also 55. For Cabin crew the NRA will now rise to 65.
To reduce the impact , for the first 5 years this will rise to 60.
- For Pilots, some countries including France & the USA apply restrictions for
flying & over flying as a Captain beyond 60. For this reason the NRA will rise
to 60.
If these restrictions are removed in the future the airline will raise the NRA to
65 and adjust Accrual & Contributions inline with other Staff.
4. For those with NRA of 65 the Accrual Rate will reduce from 1/56 to 1/60 with
Contributions unchanged at 5.25%.
For those with an NRA of 60 the Accrual Rate will adjust from 1/52 to 1/56.”
2. ABAP Comments on the BA Proposals.
Current employees face severe restrictions in the NAPS pension to be earned for the future .
BA have announced that while benefits earned to date are unaffected; going forward, the NAPS benefits will be much lower.
The Cuts are:
- Pay for pension purposes to be restricted to current pay levels plus UK Retail Price Inflation . (Except there may be a concession for promotions & incremental steps.)However not all the base pay is currently pensionable, and all NAPS pensions will be related to a notional pay that takes no account of pay growth.As pay generally creeps up faster than inflation, then over the years left until retirement this has a large impact. NAPS pension will be based on this notional pay for pension purposes. This will be much lower than the pay employees are actually receiving & living on.
2. The Pensions will be payable at a later date.
Age 65 for all Staff ,except Pilots & some Employees close to retirement
where Pension will be paid at 60.
(If you wish to retire at 62,then the pension will be reduced to take account of
the early payment.)
3. The Pensions will build up at a lower Accrual Rate.
Where the Accrual Rate is reduced to 1/60th pa this means for each £10000 of
earnings the pension will be £166.80pa instead of £178.50pa .
4. Once retired, pension increase is at a rate of inflation capped at 2.5%pa. .
Each year in retirement the NAPS pension will increase by the lower of the
RPI or 2.5%. Should inflation run at even 4% pa, you will find it harder &
harder to make ends meet. It should be noted that current pensioners find
Utilities & Council Tax bills rise much faster than their pension and each year
they are forced to tighten their belts still further.
Future BA Pensioners in NAPS will be hard hit.
ABAP considers that these proposals will lead to Future Pensioner poverty as the cuts are very severe.
The injection of £500m into NAPS to make the promised benefits secure is window dressing. BA already has sufficient cash reserves to pay this sum immediately, and not make it conditional on the current employees accepting a large reduction in their retirement incomes.
3. Scheme Valuation 2006. Future Funding .
Both BA schemes triennial Valuation occurs in March 2006. It is a new legal requirement that Scheme Members are now to be issued with an Annual Statement on the funding state of their scheme.
This year BA will issue the Statement based on the Valuation as at March 2003. The latest 2006 results cannot be included until next year’s Funding Statement.
BA have just stated that the NAPS funding plan includes a cash sum of £500m.;
BUT only if the Trustees approve the new NAPS pension proposals.
However, the Trustees are now empowered by the new legislation to negotiate the Funding Plan for the schemes. Roger Maynard, Chairman of Trustees has told ABAP that the Trustees have hired PricewaterhouseCoopers(PwC) to assist them in the funding negotiations.
John Birch, Secretary to the Trustees has said the advice obtained in conjunction with that from other trustee advisors will enable NAPS Trustees to formulate a response to the BA proposals, and in addition assist in both the technical provisions & any recovery plan needed as part of the statement of funding principles due to be agreed with BA over the next year.
The new Pensions Regulator has already indicated that any trustees should not entertain funding plans allowing employers more than 10 years to remove scheme deficits.
The NAPS trustees will discuss their deficit repayment plans with the Pensions Regulator if they conclude BA needs a longer repayment period than 10 years.
4. Variable Pension Update.
During a recent meeting with Roger Maynard Chairman of Trustees, Sandra pressed for a satisfactory remedy for those most affected by the Variable.
He has agreed to ask the Scheme lawyers whether the Trustees have the power to amend the Term(s) of the Variable Option after it has been accepted by a Pensioner.
We will report on the results of this initiative.
In the mean time, any Member who has had a Variable complaint dealt with under Stage 2 of the Complaints Procedure please let us know the outcome.
Reports received do emphasise that the Variable Option was promoted by the Scheme at the outset in similar language to that used to promote Parts 5& 6 of APS.
Thus leading Pensioners to take the Variable Option on trust.
Many Pensioners ,when still employed by BA or its forbears, freely admit to signing up for Parts 5 & 6 on that innocent basis.
So today’s Trustees do bear a clear collective, if not individual, responsibility to find a fair outcome for an Option for Pensioners that by default has turned from a No Cost item for the Scheme, into an essential Valuable Investment instead.
Mainly funded from our older & poorer pensioners, that’s the rub.
5. AVCs Update.
There are less than 80 Pensioners who have left their AVCs untouched. These 80 can now elect to draw 25% of their funds as cash, with the remainder used to buy an annuity.
There are some 300 Pensioners who have taken some benefits from their funds and left some AVCs invested who cannot draw any more cash.
6. BA AGM 18th July 2006.
We would like as many ABAP Members who are BA shareholders to attend the BA AGM. However, being realistic we can understand if this is not convenient.
May we therefore suggest that on receipt of your AGM package, you return the Proxy Form nominating the “Association of British Airways Pensioners” as your proxy.
We will then cast the votes in a way that best represents Pensioner interests.
In order for us to gauge Membership interest, please would you inform the Chair how many proxy votes you will give your Association for the BA AGM 2006.
7. Pensioner Trustees: Payment.
Members will be pleased to learn that Pensioner Trustees are to receive recognition for the increasingly arduous duties imposed on them by Government legislation.
They are to be paid a small but significant salary (non-pensionable).
Please note, the remainder of the Board of Trustees have always received payment by virtue of being employees of the airline.
8. ABAP AGM
For your diaries.
The date for the ABAP AGM has been set for Thursday,12th October 2006.
We believe this will avoid clashes with any school half term holidays.
9. Staff Travel for Pensioners. Telephoning Staff Travel
Following the item in Newsbrief No 62 regarding the new contact arrangements for Pensioners wishing to make staff travel arrangements on BA flights there has been some reaction.
The telephone number quoted came from Touchdown magazine. The article in Touchdown about the new arrangements had been badly edited so as to be misleading.
The current situation is that Pensioners may telephone Staff Travel to book flights on
non BA flights. Pensioners presently cannot telephone to make bookings on BA
flights unless they are physically unable to use a computer.
Despite the fact that Staff Travel has always made a handsome profit. It seems to
make this economy counterproductive by discouraging Pensioner staff travel .
ABAP is informed that the Retired Staff Association is renegotiating this difficult issue. Will Members contact the RSA (see Touchdown) to make their views known on this unsatisfactory arrangement that discriminates against senior Pensioners.
10. ABAP Treasurer.
It is with some regret that Jack Shill has intimated to the Committee that he will be standing down from the post of ABAP Treasurer at the 2006 ABAP AGM after some years sterling duty for the Association.
We are therefore urgently looking for a worthy replacement for Jack. In keeping with the item on Pensioner Trustees, ABAP is offering a £500 honorarium with the post.
Please contact: Sandra Sellers, ABAP, c/o 81 New Road, Harlington, Hayes, Middx. UB3 5BG.
11. Treasurers Corner: Payment by Bankers Standing Order
In order to facilitate the payment of all subscriptions, the Treasurer has arranged that ABAP can accept now payments by Bankers Standing Order.
Please request your Bank for a Standing Order Form , complete it with your details and send it to: * 2006/2007 subs due July 2006.
Jack Shill
Forty One (41)
Linkway
Crowthorne
Berkshire RG45 6ES
12. Membership Secretary. Contact Amendment.
Please amend the contact instructions given in Newsbrief No 62.
Please do not use his home number for ABAP.
If you cannot email Harry Heap, then email ABAP at: daynemarkham@hotmail.com Or please write to: The Membership Secretary, ABAP, c/o 81 New Road Harlington
Hayes, Middx. UB3 5BG.
13 Correction to "Any Other Business Section" of AGM Minutes in Newsbrief No 62.
Geofff Nolan actually said that he had given ABAP two specific organisations to contact and neither had been followed up.
He also said the Trustees had requested a risk related contribution to the Pension Protection Fund, not an exemption. Capt. Pocock confirmed this at the time.
The Committee of ABAP 28th March 2006