Newsbrief No 83

January 29th 2011

Contents:

1. Your Annual Pension Increase.
2. Request for RPI information.
3. APS & NAPS Members Meetings.
4. Eligibility to attend Members Meetings.
5. VPO Update.
 ……………….

1. Your Annual Pension Increase.
This Government plans to reduce your living standards for the rest of your lifetime. It has already been decided that State Sector or Publicly Funded schemes, which in recent years have almost invariably been linked to the Retail Price Index (RPI) will in future give an increase based on a lower measure of inflation called the Consumer Price Index (CPI). Please note that this does not apply to the State Pension itself, which will increase by RPI this year, and from 2012 will be linked to the higher of CPI, average earnings, or a 2.5% increase (due to an editorial error the printed copies of this News brief contained an inaccurate statement regarding the State Pension. Our apologies).

The Committee thanks all members for their response to the requests in Newsbrief No. 82. Following Members action in sending their postcards to the Pensions Minister and writing to their MPs in concert with many Pensioners from other private schemes the Government has decided to delay any overriding legislation and to consult on whether all private sector Schemes should be compelled to use CPI. This is good because it means that so far as BA Pension schemes are concerned, the ball is back in our court. However since our Rules are the same as for public sector schemes such as the Police & Civil Service, to avoid CPI the Trustees must change the wording away from “the Annual Review Order “and spell out the Retail Price Index (RPI.)

This sounds straightforward but the Trustees have not yet made their position clear to us. This delay seems to indicate some dissent, following an informal release by BA Pensions in favour of RPI in November, ABAP is also awaiting reassurance on this matter in a reply from the Chairman of Trustees to our letter of 7th January expressing concern over any change away from RPI. RPI is not a perfect measure of the cost of living but CPI is much worse.

The 2010 figures for RPI & CPI differ by 1.5%. So for each £1000 of pension we will be £15.00 pa worse off for the rest of our lives. This will happen each year so that after a period of years the results mount up, and will be a severe loss, potentially reaching 20 or even 25%. So that our pension will be much lower as we get older and more frail. Some may say we should live with this difference; but the whole idea of indexation is to preserve the purchasing power of pensions into old age. Without the right index this does not work. In reality we all know that over years RPI is not perfect. But it has been going since 1915 based on a basket of goods prices and has been used as the basis for the Annual Review Order for some time.

The CPI arrived in Britain from the EU in 1996. Its choice of components come from all countries in the EU; and it was originally to be part of the change of our currency from Sterling to the Euro. In fact many States disagreed with the composition of the CPI, so it arrived here incomplete. For example, valid pensioner costs are omitted, like council tax & house maintenance, while student rents & tuition fees are included, as is the price of new cars.

The main difference however is not what is included or excluded, but is the geometric method of calculating rising prices, which is, contrary to HMG views, unsuitable for pensioners. It assumes we can change our buying habits to cheaper items if prices go up. However we all know we cannot buy cheaper water rates, utilities or fuel just by shopping around. It is clear that the main reason HMG has gone for the CPI now to replace RPI is because it will save HMG money on government pensions by being a lower figure; whether it truly covers UK inflation appears to be secondary.

Saving money in the public sector has nothing to do with private pensions at all, but because we were once a nationalised our rules are still the same as public sector schemes. APS members who were still in employment in 1984 chose not to accept a cash sum to move to NAPS so that they could have full RPI indexation. NAPS members still in employment have only recently agreed to accept lower benefits which they surely would not have done had they known that HMG action would reduce the cost of providing pensions by hundreds of millions of Pounds, in effect now for the benefit of BA shareholders.

Is this correct?

YES – the 80000 members of APS & NAPS will receive payouts over their lifetimes some hundreds of millions less than if RPI had been applied. In the past they had chosen & paid for indexation. ABAP feels this is not for opportunist tinkering now. This why we need to convince the Trustees to change the Rules to remove the compulsion of the Annual Review Order and stick with RPI until a Pensioners Price Index for all pension schemes can be evolved.

2. Information Request to Members
It will be of great help if Members have any letters or literature from BA Pensions or BA referring to RPI. Please in the first instance phone or email Dayne Markham 01489 782 637 daynemarkham@hotmail.com

3. Proposed APS & NAPS Pensioners Meetings on RPI/CPI
In order that the opinions of APS pensioners should be clear to the Scheme Trustees it is proposed to call a Meeting of APS Members & Pensioners under Rule 25 to which the APS Trustees will be invited. The signatures of at least 100 members are needed to call such a meeting.
A similar NAPS meeting will be called in due course

The strength of our feelings on this matter will be shown by the number of requests received for an APS Pensioners Meeting, and delivered to BA Pensions. ABAP will send out a prepaid pre addressed “Request Postcard” once it is clear whether this meeting is needed.
Timing will be of the essence. Details will then follow regarding Date, Time & Place from BA Pensions. ABAP will then advise further arrangements.

Remember, ABAP will be calling an APS meeting first because of the unique ability of the APS Trustees to change the Rules without reference to BA.

4. Attendance at Members Meetings.
Any scheme member or beneficiary in receipt of an APS pension may attend. It is vital that as many of you as possible make arrangements to be there. This could be the biggest issue we have faced since the Proposed Scheme Merger.

5. VPO Update.
On behalf of ABAP our lawyers have been requesting monthly reports on the VPO complaint progress as the result is overdue. A statement from the Ombudsman was promised for December 13th but this has not materialised. Now a strong reaction to this hibernatory behaviour has extracted a promise for an initial answer to our complaint to be with us early next month.

Apparently the Pensions Ombudsman is overwhelmed with unexpected business..

The Committee of ABAP 29th January 2011