NEWSBRIEF No. 79
4th January 2010.
Contents
1. The Chairman of Trustees
2. The 2009 Triennial Valuation.
3. Merger of BA with Iberia
4. The Continued Imbalance of Both Boards of Trustees
5. APS Pensioner Trustee Election: Capt. Cliff Pocock
6. BA Voluntary Redundancy & ABAP Membership
7. Subscriptions: Personalised Reminder
1. Chairman of Trustees (compiled by Dayne Markham)
As Members will be aware, on the 14th December British Airways issued a preliminary statement concerning the valuation of the APS and NAPS pension schemes. At the same time it was announced that Roger Maynard, the Chairman of Trustees of both APS & NAPS, had been asked by British Airways to step down as the Chairman from both boards to avoid any possibility of a conflict of interests within his three positions in BA, BA Pensions & Iberia.
This action was in marked contrast to comments made to ABAP in November, when it appeared that there was no confliction over Mr Maynard’s multiple roles. This was despite considerable comment in the financial press from all quarters.
From our point of view, despite the Association’s well-known views regarding the desirability of having an independent Chairman of Trustees, Mr Maynard’s departure is regrettable, both for the loss of his experience and knowledge, but also for its timing – the 2009 Triennial Valuation and negotiations to reduce the deficits of both schemes are at a critical stage, with final valuation and action plans to be agreed without fail by 30th June 2010. It is obvious to all that the deficits are considerable, and whilst BA profit levels remain negative or marginal, agreeing and achieving any reduction in deficits is a challenge, to put it mildly.
However the preliminary deficit statement was dated from the bottom of the equities market. Since then equities have performed strongly which currently improves the deficit position, while of course not curing it. Any sustained worldwide recovery from recession will continue to improve the pension deficit position. A point of clarification: The latest figures do not represent a deterioration over 3 months since the last schemes snapshot, they are a refinement of the figures over the 3 year period since the last valuation.
The deficit refers to the total liability of each scheme to the very last surviving pensioner or surviving dependant beyond 2100 AD. The schemes are both still worth substantial sums and are well able to pay existing pensions already in payment. It is in the latter years of the schemes where the shortfall could occur if corrective steps are not decided now.
Following Mr Maynard’s departure, the ABAP chairman wrote to the Pensions Regulator requesting that he should advise BA to appoint an independent Chairman of Trustees. For clarity, Members should be aware that the roles of both the Chairman and Deputy Chairman are BA appointments, and this structure is an integral part of both schemes: in other words, although the Pensions Regulator may well have the power to step in and insist on an appointment, this would be a major and radical action, with potential far-reaching consequences. However, BA may themselves appoint a non-employee in the role of Chairman, and it is to be hoped that they do so, provided that the individual concerned is of the right calibre.
ABAP has since clarified its position on an independent Chairman of Trustees. The new chairman should be independent but still airlines-pension knowledgeable. This person may well take some time to find.
The Pensions Regulator has since replied to ABAP that it would seem reasonable at this stage to expect that an appointment of a replacement (Chairman) will be made with similar sentiment (i.e. with no perceived areas of conflicts of interest.)
In the meantime it could well be appropriate to appoint a temporary Chairman of Trustees as the deficit solution deadline of 30th June 2010 inexorably moves closer.
2. The 2009 Triennial Valuation (compiled by Dayne Markham with David Waddington)
Again, most of you will have now seen that APS and NAPS are in deficit to the tune of £1bn and £2.7bn respectively. The correct term for these figures is “provisional deficit” as final agreement on both the amounts and recovery funding are still to be agreed (as above). It would be idle to pretend that these figures are anything other than disturbing for Members. The amount of the deficit, and the seeming lack of readily-available funds to recover the position quickly suggests that there is no easy solution, with the need to support the scheme being balanced against the need for BA to remain in business (which is the best way to support the scheme in the long-term). Imposing penal levels of short-term funding from BA could damage the Company, and this is definitely not in the interests of BA pensioners.
It is worth repeating that the deficit of each scheme refers to the total liability of that scheme to pay the pension of the last surviving member or surviving dependant beyond 2100AD. Both schemes are still worth substantial sums and are well able to sustain payment of pensions already in payment.
3. Merger of BA with Iberia (compiled by Dayne Markham)
The key questions for Members are:
• Is the merger good for BA?
• Is it good for the pension schemes?
These can only be answered in the context of strong links remaining in place between the new organization, BA, and the pension schemes. Any resultant increased profit for BA should, in theory, benefit the schemes. However, there are clear concerns about asset removal, and some suggestion has been made in the business press that if the merger proceeds, then a TOPCO (combined Boards of BA & Iberia) structure with a life of 5 years may be proposed. Given that it seems unlikely that any deficit reduction would be complete in such a short timescale, the role of the Trustees in monitoring the situation is key. The handling of the deficit is the crucial factor for the completion of the Iberia merger.
4.The Continued Imbalance of Both Trustee Boards: Pensioner Elected Trustees (Dayne Markham)
Members are well aware that progressively in both schemes, now that they are both closed to new members, the balance of member nominated trustees (MNTs) should change steadily with the movement from Actives to Pensioners as members retire.
In APS the balance is now moving into the final stage, assisted by the current programme of Voluntary Redundancy, there being something of the order of 1000 members & 20000 pensioners & dependants. As is well known there are 2 Trustees elected by the remaining 1000 members and 4 trustees for the 20000.
In NAPS there is currently one pensioner Trustee for some 19000 pensioners & dependants & 5 trustees for approx. 40000 members.
Great store is made of having each board made up of 6 BA appointed Trustees & 6 MNTs elected by the members & pensioners. But the weight of opinion is distorted if the MNTs are not in the correct proportion. As is the case, at this most momentous period in the history of the schemes now being addressed by the Trustees.
Before standing down Mr Maynard had accepted this imbalance needed adjusting; but he was not prepared to put it in hand until after the valuation process was complete later in the year. ABAP pointed out that the imbalance could well affect the decisions made by the Trustees and in this case those decisions made would not be truly representative of the make up of the schemes.
ABAP is of the opinion that if a Trustee re-election can be held during the period of the valuation as has now been announced, it is a relatively simple matter to carry out the necessary additional elections at the same time to correct the imbalances in both schemes and improve the quality of the decisions taken.
What clearly is needed to restore the balance is the election of another Pensioner Trustee for APS and another for NAPS. As Mr Maynard is no longer in post his view no longer holds. ABAP calls for the current Trustee election now being prepared to be enlarged accordingly.
5. APS Pensioner Trustee Election: Capt. Cliff Pocock ( Dayne Markham)
The term of office of Captain Cliff Pocock ends on 31st March 2010. He has indicated he intends to stand for a further term. Capt. Pocock is sterling value both to Pensioners & the pension scheme. In addition he has recently qualified in Law.
ABAP has no hesitation in supporting his re election and recommends the full support of the Membership.
In addition as a matter of urgency, ABAP would like to hear from any ABAP member in APS or NAPS who is interested in becoming a Pensioner Trustee.
6. BA Voluntary Redundancy & New ABAP Members (Jack Shill)
When Voluntary Redundancy (VR) was announced last year ABAP responded by offering existing BA staff & new pensioners free first year membership to June 30 2010 if they joined ABAP before 31st December 2009.
VR is still running, so ABAP will extend the new members free offer from now until 30 June 2010. Tell your friends the sooner they join ABAP the more they will save.
7. ABAP Subscriptions 2009/2010 (Jack Shill)
This month ABAP is sending out individual subscription reminders. Please fill out the form and return it to Renew even if you are FOC (Free Of Charge)
If you do not find one with your Newsbrief then you have paid your sub for this year.
Many Thanks for your Support !.
STOP PRESS STOP PRESS
ABAP has also received a duplicated subs payment by bank transfer from Bank Code 08 -92 -86 Account No. 02142526. Will this Member please contact me on 01 344 774 170 at his convenience?
We wish All Members a Happy New Year 2010.
The Committee of ABAP 4th January 2010. .