Newsbrief No. 67
17th April 2007.
Contents
1.Change of Address.
2. Deregulatory Review, Section 67& Postcard.
3. 2006 Valuation of APS & NAPS
4. Variable Pension Option.
5. NAPS Pensioner Trustee.
6. APS Pensioner Trustees.
7. Financial Assistance Scheme Extension.
1. Change of Address.
From 1st May 2007 the postal address for the Association of British Airways Pensioners is as follows :
5 Heathrow Boulevard
278 Bath Road
West Drayton
Middlesex
UB7 0DQ
For the present, initial telephone contact remains as 01 489 782 637.
2. Deregulatory Review, Section 67 & Postcard.
As our regular readers will know the Government is now considering whether all the Pensions Legislation it has enacted has damaged Pension Schemes. Of course we all know that Gordon Brown has removed tax concessions for Pension Schemes but you may not be aware of all the other ways that the legislation has added to Schemes’ costs.
Very recently the Government gave us just 4 weeks to respond to their latest ideas on future pension regulation. This in itself was a new idea, as previously the customary period for consultation has been 3 months.
These ideas also include those designed to stem the flow of employers who are in droves choosing to close their Pension Schemes, or like BA with NAPS, reduce the benefits on offer for the future.
You may like to know that the Trustees of your Schemes did not submit any response on the Deregulatory Review to the Government , but that ABAP has done so.
The Committee thanks all Members who managed to add weight to this campaign by posting the recent ABAP Postcard to the DWP.
We apologise for the urgency of the mailing and the lack of explanatory briefing, but time was of the essence and the prepared brief could not be accommodated in the tight schedule to meet the deadline. This is turn was partially caused by the unusually short consultation period set up by the Government.(see above)
Many members rightly queried the closure date of April 6th as it fell on Good Friday, a permanent Bank Holiday consequently with no postal deliveries. In response ABAP immediately contacted the Dept for Work & Pensions and the closure was extended to the week following Easter.
For this concession ABAP would like to record its thanks to the Officials at the DWP concerned..
We hope that our efforts will ensure that it remains impossible for Employers to reduce ANY benefits already earned. An update will follow on this issue.
Next follows a report on the first ABAP scheduled Meeting of 2007 with Roger Maynard Chairman of BA Pensions Trustees.
3. 2006 Valuation of APS & NAPS
The actuarial reports are now finalised. All Members are entitled to request a copy from BA Pensions, Whitelocke House, of the Report on the Scheme of which they are a Member. A BA Pensions Newsletter will be with you shortly, but you may be interested in a few thoughts from ABAP:
NAPS
The £800m promised by BA has been paid into the Scheme, so that the assets have increased. Scheme Liabilities have been reduced by £372m, as a result of the agreement that Pensionable Pay growth will be limited. The Scheme still has a deficit, but now has 77p for every £1 it is predicted to need. It is important to understand that these predictions are based assumptions set out in the Valuation report & in particular that the assets are assumed to earn 5.2% interest.
ABAP considers that over the long term these assets will earn more than this, as 60% of the Scheme assets are still equities. We think this likely as the 2003 Valuation assumed a return of 6.8% would be achieved. The 2006 Valuation has shown an extra £1543m was earned over and above the expected figure in the previous 3 years.
From this £521m has been set aside to cover improved longevity, and in our opinion, more will be need in future. The Trustees are still anticipating that male members of NAPS will not survive as long as those in APS! But the Ladies of APS & NAPS have the same expectancy.
In view of the increased longevity, the Trustees have approved changes to all the “factors” used to calculate pension at the point of retirement. At retirement Members will now have a smaller penalty for retiring early, and will get a higher price for each £1 pa of Pension they commute. In NAPS the Scheme has forgone £98m profit it would have made using the old commutation price.
ABAP maintains the view that Members shoulder be cautious about commuting their pension and must seek independent expert advice.
ABAP is pleased to see Members are getting better value for money at retirement but are MOST concerned that yet again money is allocated to those still in employment without any recognition of the effect of longevity has had on those who accepted the Variable Pension Option in the past.
APS
The Scheme has a surplus of £22m over and above the amount it is predicted to need.
It is important to appreciate that these predictions are based on assumptions set out in the Valuation Report and in particular that the assets are assumed to earn 4.5% interest. You will note that this figure is lower than that assumed for NAPS because 78% of assets are now in Bonds as the Trustees rightly place emphasis on Security rather than Performance.
ABAP warns however that the capital value of Bonds is not secure. Some commentators are saying there may currently be a “bubble” in Bond values.
At the current value APS has more assets that it would need to provide all Members with Benefits up to the limit laid down by the Pension Protection Fund, and should BA become insolvent, then the injection of a further £230m promised by a recent Bank Guarantee arrangement would probably mean that all benefits could be paid in full.
In addition £399m has been set aside to cover expected increased longevity into the future. In view of the increased longevity, the Trustees have approved changes to all the “factors” that are now used to calculate pension at the point of retirement. At retirement Members will now have a smaller penalty imposed for retiring early and will get a higher price for each £1pa of pension they commuted.
In APS the Scheme has forgone £75m in profit it would have made under the old commutation price. But, just as for NAPS, ABAP is still of the view that Members must be cautious about commuting their pension and must seek independent expert advice.
ABAP is pleased that Members will be getting better value for money at retirement but remains MOST concerned that scheme money is still being allocated to those still in employment without any recognition of the effect that increased longevity has had on those who accepted the Variable Pension Option in the past.
There seems a blindness in the perception of longevity in that not only will future pensioners live longer but that our older pensioners are already doing just that.
4. Variable Pension Option
ABAP has engaged pension lawyers to press the Trustees for a just settlement. At the meeting ABAP asked that a working Group be set up by the Trustees to see what solution could be found. In addition to evidence from other Schemes Variables being presented, ABAP pressed the point that factors have been improved for current employees, yet factors in the past were underestimated for longevity by a substantial margin because past Trustees had not kept the factors up to date at successive Valuations over the years.
5. NAPS Pensioner Trustee.
ABAP congratulates Mr Geoff Le Boutillier on his appointment as the new Pensioner Trustee for NAPS. Thanks are due to Dave Gunner for all his efforts during his time in post. We hope he will now strengthen the ABAP committee.
6. APS Pensioner Trustees.
The Trustee have used their power under the new legislation to increase the number of Trustees from 10 to 12.
From the 12, the 27000 APS pensioners will nominate 4 Pensioner Trustees; that's a ratio of 1: 6750
From the 12 the 2000 APS current employees will nominate 2 Trustees; that's a ratio of 1:2000
ABAP is shocked and profoundly disappointed that the Trustees have decided that this distribution meets their legal responsibility to arrange a fair & proportionate APS Trustee Board.
A certain myopia appears to ignore the inexorable March of Time, dictating that ALL APS Members will be Pensioners soon enough.
There is perhaps some misconceived idea that Pensioners are not able to act in the interests of all Scheme members. This could not be further from the Truth.
We did not hand in our Integrity & Faculties when we retired.
Indeed it is rather the current Cult of Youth that has no place on an APS Trustee Board. The current APS Pensioner Trustees are certainly an asset to the Scheme.
Constructively, ABAP has asked Roger Maynard to consider whether the Pensioners could be allowed to nominate a professional Pensions Expert as their Pensioner Trustee. It was thought that the APS Trust Deed would not permit it, but BA itself may itself decide to appoint an independent Trustee as one of the Management Appointed Trustees.
ABAP would welcome this improvement for both APS & NAPS.
7.Financial Assistance Scheme Extension( for those who have lost their pensions)
This is a resumé of a press release by Prof. Roz Altmann. March 21st 2007 Budget Day.
“More Spin! Still trying to get away with this dreadful injustice!
The Chancellor Gordon Brown’s announcement of yet another extension of the Financial Assistance Scheme (FAS) may sound good , but that has been the case every time so far. In reality it is nowhere near enough. How long do these stricken people have wait for justice?
The majority struggling to cope without their pensions will see no improvement today. There are 100,000 over 65s who should be receiving money from the FAS yet only 900 have received any money at all. All the 100,000 need help but the announcement does nothing for them at all.
This is a classic example of figure fiddling, pretending to be generous but not sorting the problem. Just More Smoke & Mirrors.
Today’s announcement will mean that people now in their 20s & 30s will receive some of their pension back when they retire. It is welcome news that everyone will now be included in the FAS and that the cap has been lifted to £26k and those entitled to less than £10pw will still be helped.
This does not help those suffering now. The victims still lose as follows:
The FAS pays from age 65, but those who retired at 60 lose 5years.
The FAS excludes solvent Employer Schemes Members. They have been abandoned.
The FAS still pays no indexation linking.
The FAS pays no tax-free lump sum.
The FAS pays Widows Benefits that are lower than Pension Scheme Benefits.
The FAS pays 80% of core pension NOT 80% of expected pension (ie 60% of expected pension)
The FAS is still inadequate. MPs must hold their Nerve and Force a Fair FAS solution on this Government. Gordon bombed it in his last Budget!”
The Committee of ABAP 17th April 2007