NEWSBRIEF No. 66
Contents. 24th January 2007.
1. Membership.
2. Pensions Act 1995 Section 67.
3. Proposed Pensions Bill.
4. NAPS Benefits Reductions.
5. Would a Merger Help NAPS ?
6. Variable Pension Update.
7. Pension Protection Fund: Update.
8. NAPS Pensioner Trustee.
9. British Airways Travel Shops.
10. Investment of Scheme Assets: Update
11. John Ritchie, President of the Actuaries Institute.
12. Outstanding 2006/2007 Subscriptions.
1. Membership.
A Warm Welcome to our New Members.
We are pleased to note that hundreds of new Members have joined over the last 6 months . Many issues have prompted this. We hope you will find useful information and support as result of your Membership in future years.
If you do, please pass copies of our Newsbriefs on to others who have pensions from British Airways and urge them to support us. In this issue we hope to cover items of interest across a broad spectrum.
2. Pensions Act 1995: Section 67.
Section 67 is the legislation that prevents an Employer from reducing benefits already earned retrospectively. (The Law allows BA to negotiate reductions for current employees for the future. But imagine if they could also cut benefits promised for service to date!)
The latest Government White Paper included a suggestion that the Law be changed so that Employers could cut some Benefits, such as Annual Pension Increases. The idea gathered sufficient support for a Working Group to develop proposals.
A great many of our Members have written to their MPs or directly to the Ministers responsible, James Purnell or John Hutton, expressing their anger or concern.
If you have not received a reply, perhaps you were one of those who forgot to add your name & address to our suggested wording! In this case all is not lost, as the MPs replied directly to ABAP and asked us to inform you. Two items of news emerged:
i) That the Pensions Bill issued on the 29th November 2006 does NOT include any changes to Section 67.
ii) Both Rt. Hon.Members Hutton & Purnell have stated in writing :
“that there are no plans to consider changes to the Rules affecting current
Pensioners.”
So far so good. BUT please note the Pensions Bill does include confirmation that further measures to simplify Private Pensions will be introduced, and the phrase
“ there are no plans” is not exactly a strongly worded denial .
In any event, if your pension is not yet in payment, then it would appear that the Government might sanction a cut in the amount promised, or a change in the age at which it is payable.
ABAP has met with representatives of the Unions and urged them to raise this matter. They have asked us to ensure that all our Members continue to lobby against this; write to magazines and the media, urge Trades Unions to allocate time & money to resist this threat to our retirement incomes.
You may think this is not necessary as it will never happen. But be aware, there is a considerable level of support for just such a change to the Law.
3. Proposed Pensions Bill.
The Bill proposes changes to the State Pension, but not before 2010. The Government view is that “There is no pension crisis for today’s pensioners”.
Members of ABAP have written to urge that State pensions be increased by the same rate as wage inflation, not price inflation.
John Hutton (a Pensions Minister see above) has written to ABAP saying there is “Little evidence to suggest that the rates of inflation pensioners face are substantially different from, or higher than, the rates for the population of this country as a whole over the long term.”
You and your Committee well know that a higher percentage of a Pensioner’s income is used on utilities and council tax, but John Hutton says Pensioners’ income increased by 25% between 1996 & 2005, whilst utilities increased by 15%.
We urge you to calculate your personal rate of inflation and write to either, or both. Mr Brown and Mr Hutton, with your personal experience of their mathematics on your pocket.
The Daily Telegraph/ Capital Economics investigation into inflation shows some Pensioners are facing an equivalent Consumer Price Index (CPI) of 9.1% as increases in electricity & gas prices eat into their disposable income. Mr Brown’s CPI is 3.3% or thereabouts. Fortunately our Pension increases are governed by the RPI which is always higher.
4. NAPS Benefits Reductions.
It is now expected that the benefits earned for service given after April 2007 will be reduced. However, current employees will be offered the chance to pay extra contributions to obtain better terms.
Paying extra will require financial sacrifice at a time when house mortgage interest rates are on the upswing. You should seek qualified advice to decide whether it would be worth paying extra for you at this time.
5. Would a Merger have Helped NAPS ?
It has become apparent through conversations that some believe that the deficit from which NAPS is suffering could have been avoided if APS had in fact merged with NAPS. We have even heard ABAP being accused of being unsympathetic to the thousands of NAPS members.
Let us be clear on this matter. ABAP represents the views of its entire Membership, these can be summarised as:
“We should receive what we have been promised, and more if the scheme can afford it.”
This applies to whichever Scheme you are in.
APS members have paid higher contributions than NAPS members in order to have :
i) No deductions from their pensionable earnings, so have a bigger pension.
ii) A pension that is fully inflation proof once in payment.
iii) The security of a Trust where the Terms are stringent & passed actions have meant that money was not spent as expected and remains in the fund to cover future payments.
The recent Actuarial Valuation reports there is no Disposable Surplus in APS.
Indeed whilst the Trustees and their Advisers are minded that the assets would be enough to cover pensions promised to date, BA will have to pay contributions to cover the costs of those few employees still in APS, and provide contingent assets in case they cannot afford contributions in future.
There is no extra money in APS that could be released if the Schemes were merged.
Why then does APS not have a deficit ? Simply because APS members have over the years paid enough themselves to cover their pensions. ( BA has not contributed to APS for many years.) APS members have paid extra for a pension that will increase in line with RPI whatever it reached. For the last 20 years inflation has been low enough for NAPS pensioners to do just as well. APS contributions have been invested in the stock market and have benefited from the equity growth from 1980 to 2000. In return they have not been given any extra pension, but at least they can sleep easy each night fairly sure that the fund has enough money to pay what is due.
NAPS members do not have the comfort of a financial buffer in their scheme but now the Law has introduced the Pension Protection Fund (PPF) they should be sure of good value from the contributions they have made.
6. Variable Pension: Update.
Since Newsbrief No 65 the Committee has set up a small Working Group, including professional input, to find out how other pension schemes handle the VP. So far it has come to light that by no means all schemes offer this option. But some have been found with interesting features.
When a detailed presentation has been put together it is our intention to meet with the Pension Trustees as we now have the required number of signatures to call a Meeting, thanks to an enthusiastic Membership response.
In the mean time BA Pensions have been most helpful in providing data. It is clear they would like our complaint properly sorted out.
BA Pensions will not offer the VP after 1st April 2007, so far we do not know why; and must resist making a guess.
7. Pension Protection Fund; Update.
The European Court of Justice (ECJ) will decide on January 25th 2007 whether the PPF is obliged to give members of Final Salary Schemes ALL of their entitlement, rather than just the limited compensation amounts declared when their employer becomes insolvent.
8. NAPS Pensioner Trustee: Could It Be You?
Perhaps you are interested in serving in this rewarding but exacting role.
If you would like ABAP support please contact us immediately by writing to 81 New Road.
9. British Airways Travel Shops, Web Travel, or BAVS.
Under current legislation, when any employer ceases to have current employees in a pension scheme, then it has to pay in a lump sum sufficient to secure all its former employees pensions. If you were employed by any of the above, these employers have been made to pay extra money in to the pension scheme.
However, you should note that the Trustee decided that this extra should be added to the overall fund and not earmarked to provide any extra security for your promised pension. In the event of a future problem with your pension scheme you will be no better off than any other member despite the injection of cash from your employer.
10. Investment of the Scheme Assets: An Update.
Both APS & NAPS invest money in commercial property. This has done well lately. Recent press articles have confirmed that the BA pension funds have bought a number of Tesco stores and will rent these back to Tesco. Let us hope these prove a good investment for our funds.
11. John Ritchie, President of the Actuaries Institute.
We close with an excerpt from Mr Ritchie’s speech on 20th.November 2006 :
“Never forget that if an Employer becomes Insolvent before the Pension Scheme
is Solvent, the Members do not get their promised level of benefit, notwithstanding the Pension Protection Fund.”
12. 1st July 2006/June 30th 2007 Subscriptions.
The database still shows some Members should bring their subs up to date. Please check your return has not temporarily slipped to the bottom of your Pending Tray.
Then send it to:
ABAP
Unit 10
Solent Industrial Estate
Hedge End
Southampton
SO30 2FX
With Best Wishes for 2007 to All Members.
The Committee of ABAP 24th January 2007.
Deregulatory review of private pensions
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Deregulatory review of private pensions