News flashes

Forces Pension Society article on CPI/RPI

We have received permission to publish a useful article featured in the current edition of Pennant - the Forces Pension Society's magazine. We think it is useful reading for members, and provides a useful comparison between the two indexes. Download here.


BA could divert resources away from pension battle


Our chairman, Mike Post, had the following letter published in the FT on May 31st. Many of us will consider that the questions in his closing paragraph are not only reasonable, but worthy of an answer…

"Sir

On 25 May you reported that British Airways will appeal against the judgment handed down on 19 May 2017 in which Justice Morgan rejected all BA’s claims against the Airways Pension Scheme trustees who, in 2013, had decided to pay a 0.2% discretionary increase to APS pensioners.

The Judge exonerated the APS trustees and described the scheme actuary as “of outstanding ability”. BA is appealing on two points of law. The Judge said that he would allow the appeal because, if he did not, BA would apply directly to the Court of Appeal which would prolong the litigation resulting in an even longer delay in making legitimate payments to pensioners. At the anticipated completion date of the permitted appeal it is calculated that approximately 6,100 pensioners (out of 28,000) will have died since BA initiated the litigation in 2013.

The discretionary increases are the means to restore, Colin Marshall’s 1984 pre-privatisation pension promise, the breach of which was collateral damage of the Government’s 2010 decision to pay CPI rather than RPI increases to public-sector pensions. The litigation has cost BA millions of pounds. Early in the case, BA attempted to make the APS Trustees personally liable for the costs of defending themselves. In July 2014, a Judge ruled that it was “entirely unrealistic and unreasonable” to expect the trustees to put their personal assets at risk for actions on behalf of their beneficiaries. BA subsequently agreed to pay all the costs of the action.

Especially in view of BA’s current problems, would it not make better sense for the BA Board to abandon its vindictive battle against its pensioners, their trustees and their advisers and instead to focus its efforts and money on running the airline? Perhaps the huge sums that have been spent on the current, nihilistic legal battle would have been better spent making BA’s IT system resilient?

Mike Post"


Latest Newsbrief


NewsBrief 106
is available for download by clicking here. This provides an update with the latest status we have on the APS Trustees court case.

Judge Rules in Favour of APS Trustees' Decision to Pay Discretionary Increases

ABAP is pleased to report that today Mr Justice Morgan handed down his judgment on the case that BA had brought against the APS Trustees on 6 December 2013 in an attempt to stop them paying a 0.2% discretionary increase in 2013. The Judge ruled that the Trustees’ decision to pay the discretionary increase was legal.

The full judgment may be found in the News section of the APS Section of the My BA Pension website at:
https://www.mybapension.com/resources/news/aps_full_copy_judgment.pdf

A statement by BA Pensions may be found here:
https://www.mybapension.com/resources/news/aps_discretionary_increase_litigation_court_judgment.pdf?v=2

A Q and A sheet may be found here:
https://www.mybapension.com/resources/news/aps_discretionary_increase_judgment_faqs.pdf

There is a High Court hearing at 10.30 am on Thursday, 25 May to consider the “consequential matters” which will presumably where we will learn whether or not BA will appeal the judgment.

It is too early for ABAP or Mike’s List to comment. it is good to see that BA Pensions is on the ball reporting events as they happen.

Without your support, we would not be in the position we are now in.

James Phillips of Professional Pensions magazine attended almost all the days of the hearing and his reporting of events was excellent. His report of the judgment is below:

"British Airways (BA) has lost a landmark trial to block its pension trustees' decision to award a discretionary increase in 2013.

In a seven week battle towards the end of last year, the trustees of the Airways Pension Scheme (APS) were taken to the High Court to defend a 0.2% discretionary increase - above the rate of the Consumer Prices Index (CPI) - to members in the 2013/14 year.

The decision had been made after the scheme was moved from the Retail Prices Index (RPI) in 2011 - as it was linked to the Treasury's Pension Increase Review Orders - and a recovery plan had also been agreed based on RPI in 2010, and then again in 2013.

However, in his 164-page judgement, published today (19 May), Justice Morgan said the APS trustees had not made a "benevolent or compassionate payment", had not committed an abuse of power, and had regard "to all relevant considerations and to no irrelevant considerations".

The judge ruled on both the trustees' decision to amend the scheme rules - using clause 18 which allowed rules to be amended "in any way" unilaterally - to grant themselves a unilateral power to award discretionary increases in 2011, and the eventual decision to give out a 0.2% increase in 2013.

The judge agreed the deficit and BA's positions were factors that needed to be taken into account during a decision-making process, but said trustees had adequately considered these.

He wrote: "I accept that the existence of a deficit and the wishes of BA are relevant, even highly relevant considerations, for the trustees to take into account but the existence of a deficit and the absence of BA's consent do not mean that the exercise of the power must be for an impermissible purpose".

Justice Morgan disagreed with BA that both actions had been conducted improperly or were not allowed, thereby allowing the 0.2% increase to go ahead.

British Airways Pensions welcomed the decision and in a statement to members said: "We are naturally very pleased with the clarity brought by the court's decision. We welcome the confirmation from the court that we and our professional advisers acted appropriately in relation to those decisions."

The case has demonstrated the need for trustees to properly record how any decisions have been made. Pinsent Masons partner Stephen Scholefield said: "The lesson for trustees is to be honest, take advice, be clear as to why you make a decision and record it properly. If you do that then most challenges are doomed to failure.

"The case shows just how much scrutiny decision-making can come under, so trustees - and those advising them - need to ensure they have robust decision making processes, which of course fits well with The Pensions Regulator's vision for 21st century trustees.

"While the trustees stood up to scrutiny here, it is nevertheless a wakeup call for the industry."

Arc Pensions Law partner Rosalind Connor agreed, stating as long as trustees document well and consider only the relevant factors, the court will look more favourably on them.

"The court has relied quite heavily on the written evidence," she said. "That's a lesson to all of us: write it down, write it down clearly, and make sure the minutes actually reflect what you do. Turning up in court and saying ‘I know the minutes say that but actually it's something a bit different' is difficult.

"They've also said that if you have a decision to make as a board of trustees, you have to take into account the right things and not things that are not relevant. Just because you don't reach the same decision that someone else might reach, doesn't mean you've made an incorrect or attackable decision.

"It's quite a high bar for a court to overturn a decision."

Neither BA nor the APS trustees wished to comment at this time.

How the case unfolded

June 2010: Government announces plan to move public sector schemes from RPI to CPI, affecting APS due to its link to pension review orders. APS valuation is signed off using RPI

March 2011: Trustees amend the scheme rules to allow them to grant discretionary increases

April 2011: APS is moved to CPI

July 2011: Trustees hold annual general meeting where members voice rage at indexation change

October 2011: Scheme actuary presents a test for discretionary increases, which will likely be passed in 2012

December 2011: A deterioration in the funding position means the test will now fail



March 2012: Trustees vote against awarding a discretionary increase

August 2012: Trustees are presented with a new methodology for granting increases. This test is later adopted by trustees

February 2013: Trustees unanimously agree to award an increase, but set no amount

June 2013: Trustees agree a 0.2% increase for implementation in September. The 2012 valuation is agreed, including RPI assumptions

July 2013: BA and TPR voice concerns over increase, and BA threatens litigation

September 2013: Trustees agree to re-run vote

November 2013: Trustees run four votes on increase, eventually settling on 0.2% again



October to December 2016: BA and APS trustees battle in the High Court

May 2017: Court judges in favour of APS trustees"


ABAP Response to the DWP’s February 2017 Green Paper on the “Security and Sustainability in Defined Benefit Pension Schemes”.


We submitted our response this week. Click
here to see it.

APS Discretionary Increase Litigation - latest update 12th May.


We have been informed by Mr Justice Morgan’s clerk that the Judge is still working on the BA v APS Trustees judgment and that hopefully it will be released within the next couple of weeks. She suggests checking the daily cause list for the Chancery division within the Rolls building on a daily basis to see when it is listed.

The Rolls Building Cause List may be found at
https://www.justice.gov.uk/courts/court-lists/list-cause-rolls

You can check the day before for the next day’s listing.


APS Discretionary Increase Litigation.


The following message from BA pensions came out on Friday 28th April, unfortunately slightly after we had published the recent Newsbrief. It resets expectations of when we can expect a judgement in the case. The message is below.

"Message from the APS Trustee - APS Discretionary Increase Litigation

In previous communications we have committed to making the outcome of the litigation relating to APS discretionary increases known as soon as we are able following the judgment.

At the time we published In Focus in February, the expectation was that the outcome of the case might be published around Easter. We learned this week that the Judge, the Hon. Mr Justice Morgan, is still hearing another case. As a result our latest estimate, based on input from Eversheds Sutherland, our legal adviser, is that the judgment is not now expected before mid-May or early June. We would emphasise however that we are not able to predict with certainty when the judgment will be available as this will ultimately depend on how long the Judge requires to determine the various matters put before him during the litigation.

For the avoidance of doubt, this message supersedes the litigation update included with the 2017 APS pension increase statements which were written several weeks ago due to print deadlines.

As before, we will keep members updated on developments as and when we are able to do so and in the event that there is some news to report."

Latest Newsbrief


NewsBrief 105
is available for download by clicking here

Change of ABAP postal address


Please note change of our postal address.
We are moving our postal address back to BALPA house, as it will be more convenient for us in the future. Our thanks to BALPA for their support:

Association of British Airways Pensioners
c/o BALPA House,
5 Heathrow Boulevard,
278 Bath Road,
West Drayton,
UB70DQ


BA –v- APS Trustees.

We have received enquiries about when the judgment might be handed down in the BA – v- APS Trustees Discretionary Increase case which was held in the High Court from October to December last year. We have no further information except that there was some suggestion that, owing to the judge in the BA case having another large case scheduled for February, it may not be until Easter that the judgment is handed down.

Green Paper: “Security and Sustainability in Defined Benefit Pension Schemes”


Several people have drawn our attention to the press reports of the DWP Green Paper , “Security and Sustainability in Defined Benefit Pension Schemes”:
https://www.gov.uk/government/consultations/defined-benefit-pension-schemes-security-and-sustainability
The press has focussed on the suggestion that pension schemes with a sponsor in trouble should be able to reduce their indexation protection. However, in the case of BA’s two schemes, indexation was voluntarily offered and employees paid extra to receive inflation-protected pensions. In the case of APS, employees rejected large lump sums to stick with unlimited RPI inflation protection.
The Green Paper seeks the views of as wide a range of people and organisations with an interest in private sector DB pension schemes as possible. This includes members of these schemes, scheme trustees, sponsoring employers and scheme professionals.
You can respond to this consultation via www.gov.uk/government/publications, email the DWP at defined.benefit@dwp.gsi.gov.uk or write to the DWP at DB consultation, Private Pensions, 1st Floor, Caxton House, 6–12 Tothill Street, London, SW1H 9NA. The consultation will run until 14 May 2017.

ABAP intends to respond to the Consultation and suggests that as many individual APS and NAPS pensioners as possible respond with copies to your MP. It is encouraging to read that the DWP “is not persuaded that there is a general ‘affordability’ problem for the majority of employers running a DB scheme. Consequently, we do not agree that across the board action is needed to transfer more risk to members, or indeed to reduce members’ benefits in order to relieve financial pressure on employers.”

It is up to us to make sure that the DWP’s views do not change as the result of this consultation.


Guaranteed Minimum Pension.

On 28 November 2016 the Government published an open consultation on indexation and equalisation of GMP (Guaranteed Minimum Pension) in public service pension schemes. The consultation closes on 20 February 2017. The Government’s totally unreasonable intention is to repair the damage that its plans will do to pensioners in public service but to ignore the damage done to pensioners such as BA pensioners who were in public service when the GMP was introduced but who are now in the private sector. BA pensioners who will lose out thanks to the Government’s plans only include those reaching State Pension Age after 6 April 2016 and, thanks to the age profile of BA’s workforce, will be mainly NAPS members. ABAP intends to respond to the consultation and suggests that any affected BA employees or former employees should also respond. Be warned though that reading through the paper below which goes into the details of the plans may raise your blood pressure. As you will read in full here, there is a significant amount of money at stake for affected people. You can also download the paper in .pdf form here.

Latest Newsbrief

NewsBrief 104 is available for download by clicking here

BA vs APS Trustees court case.
As those of you who receive emails from BA pensions will be aware, the BA v APS Trustees case ended, after 31 days in the High Court (at vast expense), on 9th December 2016. There is a small amount of archive research to be done and the judge, Mr Justice Morgan, will be writing his judgment. Since he has another case to hear in early February, it is highly likely that the judgment will not be handed down until around Easter.

Professional Pensions magazine had a reporter, James Phillips, in the courtroom for almost all of the trial. Professional Pensions has asked me to direct you to
http://www.professionalpensions.com/tag/british-airways/ where the various reports can be found, amongst other stories.

A Happy Christmas and, hopefully, a more prosperous New Year to All.



ABAP AGM 2016
. The ABAP AGM 2016 was held at the Imperial College’s Heston Venue, Cranford, Middlesex, TW5 9PQ (formerly the Concorde Centre, Speedbird Club) at 11am on Thursday, 3 November 2016. Papers are available here on the website, and the imminent Newsbrief will contain details.


Today Programme Interview

Our Chairman, Captain Mike Post had a very short interview on yesterday’s Today programme (5th July) which turned out to be about BA missing the 30 June Triennial Valuation deadlines for both APS and NAPS. Please click here to hear what Mike had to say. Apologies for the fact that the file opens in a new window, and you will have to close that window to come back to this page when finished.


UPDATE ON BRITISH AIRWAYS' PENSION SCHEME VALUATIONS

"International Airline Group's subsidiary, British Airways, has been in discussions for several months with the trustees of its main UK defined benefit pension schemes over the schemes' latest actuarial valuations as at March 31, 2015.

The discussions, initially focused on British Airways' largest scheme (the New Airways Pension Scheme), have been constructive. However further work is required beyond June 30, 2016 (the date set by the statutory framework) to finalise the valuations and conclude a satisfactory agreement. A further update will be given as and when appropriate."

IAG Investor Relations

1 July 2016

Missing these statutory deadlines is, ABAP understands, a rare event.


British Steel Pensions

Many of you will have seen commentary in the press about steelworkers' pensions, and how they may be affected in a bid to find a suitable buyer. The government has published a consultation document, which is worth reading, here.

The consultation is aimed at "...those who live or work in Port Talbot or in steel making communities across the UK, work for Tata Steel UK, in the British steel industry more generally or are members of the scheme.

In addition, we welcome comments from those who are connected with occupational pension schemes or employers paying the Pension Protection Fund levy for schemes that they sponsor, and anyone with a general interest in pensions"

The ABAP committee think the main issues for us BA Pensioners are the following:

The BSP scheme is a very large one: 130,000 members: 14,000 are active, 32,000 deferred, 84,000 pensioners.

Tata Steel UK (most but not all of the former British Steel) want to sell. They say they can only sell if the pension scheme is separated (no one would want to buy it otherwise).

BSPS is underfunded (though not greatly so, looking at the figures) and the most likely outcome is that BSPS enters the Pension Protection Fund (PPF). “the scheme has assets of £13.3 billion and liabilities based on running on with a solvent sponsoring employer of around £14 billion, so has a deficit estimated at around £700 million on a technical provisions basis. However, the scheme is around £1.5 billion short of what would be needed to buy out benefits equivalent to Pension Protection Fund compensation levels (this is known as a section 179 basis in pensions legislation). The deficit to buy out the benefits in full is estimated to be around £7.5 billion.”

For those subject to the PPF cap (i.e. all those under normal pension age), the 2016 cap means that the maximum compensation that can be paid is £33,678 annually “We estimate that 776 members of the BSPS would be affected by the current PPF cap. Of these, 665 people (85 per cent) have more than 20 years’ service so would benefit from the introduction of the long service cap. Compensation is based on 100 per cent of the accrued pension in payment to all those who are over their scheme’s normal pension age at the date of the employer’s insolvency (or to members under normal pension age who retired on ill-heath grounds). All other scheme members are paid compensation based on 90 per cent of the accrued pension, subject to the cap.

Option 3 proposal is “Reduction of the Scheme’s Liabilities Through Legislation” This argues for reduction in current liabilities (eg lower inflation awards) but resulting in BSPS avoiding PPF and most pensioners getting a better deal than if PPF is entered. This would be one-off legislation for the BSPS. . “We are not, therefore, considering extending the proposal beyond the BSPS as a specific scheme”. So most pensioners would be better off than on PPF, some the same, unclear if any worse off (those on VPO equivalent would be worse off if not on PPF, see next paragraph).

“Because of the way PPF compensation payments are calculated, if the scheme were to enter the PPF those members who have chosen to receive a high/low pension and are under their State Pension Age would receive a compensation payment equal to the higher pre-State Pension Age amount for the remainder of their lifetime. They would not see an application of the deduction once they reached the State Pension Age. By contrast, if the scheme was to stay out of the PPF, these members would currently see their pension payments reduced by £5,408 a year once they reached State Pension Age.” We think high/low pension is their VPO option, so it looks like entering PPF is better if on VPO as the company pension reduction on reaching SPA is not applied. Are these the only pensioners who lose if they are put on a reduced-benefits scheme instead of entering PPF?

The new scheme would have to be imposed by legislation as size of scheme makes it impossible for individual consultation.

ABAP intends to submit the following, probably edited to fit the set questions. We welcome any feedback on this view by close Wed 22 June to
chair@abaponline.org

"As far as BA Pensioners’ interests are concerned, ABAP would not want any precedence set. Getting agreement on a modified scheme, albeit usually better for BSPS pensioners than PPF would give, will set a precedent. A slight possibility we must then consider is that IAG (the owners of BA) could in the future enter financial difficulties and want to modify NAPS and APS (the two defined benefit pension schemes) rules to make them affordable to IAG/BA. If this took place, BA Pensioners would be worse off. The BA schemes could collapse into PPF of course, but the risk to BA Pensioners is that a BSPS modification as proposed could increase the probability of NAPS and APS pensioners having a worse deal in the future than their current deal. We want British Steel Pensioners to continue to have their current benefits. TATA would have known of the pension liability when it bought the former British Steel part of Corus. British or Foreign-owned companies who take over companies with pension liabilities should not later be allowed to walk away from these liabilities. We would welcome a reduced-benefit scheme that was better for BSPS members than the PPF, only if it were not prejudicial to any future arrangements on other Defined Benefit pension schemes; we think however that a precedent would then be set.

ABAP is therefore against any modification to the BSPS to help the chances of TATA selling its UK steel interests. TATA should be encouraged to make the BSPS fully-funded (the gap does not seem massive compared to others) prior to a sale, or, regrettably, put a case for the scheme entering PPF, before selling its UK steel interests."

Unilever pensioners have already submitted a very clear and coherent response: we have added it as a downloadable .pdf file to our website
here. For those of us unfamiliar with Unilever pensions, The Committee of Unilever Pensioners (COUP) represents the interests of the members of the Unilever UK Pension Fund. It is totally independent of Unilever plc and the Unilever UK Pension Fund (UUKPF). Much like ABAP.


State Pension Reform & the Guaranteed Minimum Pension (GMP)

As we have written earlier, this topic is complicated, but the effects on individuals' pensions are potentially significant, and it seems that the implications are only now becoming clear to those most affected. We have set up a section on the website with information devoted to the topic. Please click here. There are links to other sites there as well.

Former Staff Healthcare


We have been asked by Nigel Carey of the BA Former Staff Liaison Council to help publicise the recent change in BA's healthcare provider from BUPA to AXA. BA and BA Clubs are now promoting AXA to current staff who attend the pre-retirement courses, as well as to all current and former staff.

Many of you are in the so called ‘group scheme’ for former staff because you transferred immediately, on retirement, from employment cover. If you are one of those people in the ‘group scheme’, you will by now have received a leaflet from BA Clubs promoting AXA. You should pay particular attention to the lower message with the red border, on the right hand side of the information sheet. BUPA renewal is due on the
1st May 2016. You may wish to continue with BUPA alternatively you may want to switch to AXA PPP healthcare.

Follow the instructions to get a quote from AXA PPP by ringing 0800 313 4935 or visit axappphealthcare.co.uk/baclubs/switch. There is more information is on BAclubs.com, and on the BA Touchdown site under Benefits.


Template letter to your MP

In NewsBrief 102 we requested as a matter of urgency that you should write to your MP about how BA misled MPs about the consequence of the APS Trustees returning to the payment of RPI increases by 2023 in linear steps as agreed in the 2012 Triennial Valuation Assumptions, and mentioned the attachment of a template letter...and then did not provide the letter with the NewsBrief! You can find it in MS-Word format here. Please mention it to friends, and if you can download a copy for someone less PC-literate that would help.


NAPS Trustee elections

Dr Jack Wheale has been elected as a Member Nominated Trustee from the Pensioner constituency of NAPS following a ballot. Congratulations to Jack, and thank you to the losing candidates - David Chinn, Duncan Holley and Marilyn Leather for putting themselves forward for an onerous and responsible job.

The Term of Office is for between five and five and a half years and commences on 1st April 2016.



State Pension Reform & GMP


This article should be read carefully if you will not have reached State Pension Age by 5 April 2016. If you are already in receipt of a State Old Age Pension on 5 April 2016, you are not affected.

By now, most of us should be aware that the state pension system is being reformed from April 2016. The current two-tier system with the basic state pension and SERPS (now known as the state second pension) will be replaced by a new simplified single-tier state pension.

At the same time, contracting out for all defined benefit pension schemes ceases, the effect of which for active members of APS & NAPS was outlined in the December newsletter.

From 6th April 1978, employers and employees were permitted to contract-out from SERPS provided their occupational pension scheme met a set of criteria known as Guaranteed Minimum Pension (GMP). This reduced state expenditure on SERPS and the benefit in return was a reduction on employers’ and employees’ National Insurance contributions. This was attractive enough to cause concern about the government being able to process the considerable number of applications in time for the start of the new tax year.

British Airways contracted out APS as it readily met the GMP criteria. Subsequently, when NAPS was introduced in 1984, it too was also contracted out right from day 1. Those of us who currently receive APS or NAPS pensions or who will eventually receive APS or NAPS pensions and reach state pension age on or after 6 April 2016 will have part of their annual BA pension inflation rise reduced. Those who reached state pension age before 6 April 2016 are not affected. Here is a summary of what we think will happen and a few examples.

Being contracted out, APS and NAPS have to guarantee to pay their members a pension from the qualifying GMP age (65 for men, 60 for women) of at least as much as the earnings-related State benefit they would have built up had they not been contracted out. This amount is known as the Guaranteed Minimum Pension. GMP is not in addition to our APS/NAPS pension but included within it.

GMPs cover two periods:
• Pre 88: 6 April 1978 to 5 April 1988
• Post 88: 6 April 1988 to 5 April 1997
If you did not work for BA in these periods, your APS/NAPS Pension is not affected.

For those reaching State Pension Age on or after 6 April 2016, once they reach GMP age, APS/NAPS will no longer be responsible for increasing Pre 88 GMPs, and for Post 88 GMPs APS/NAPS is only responsible for any increases due up to 3% a year.

Under the current State Pension arrangements, from State Pension Age (SPA) the State assesses the earnings related pension that would have applied had the member not been contracted out (referred to as the Additional Component (AC)). When the State pays annual increases, the increases apply to the total AC amount which in effect broadly provides for increases on an amount equivalent to the Pre 88 GMP and any increases over 3% a year on the Post 88 GMP. These increases apply from the state pension age rather than the GMP Age. As SPA can be later than GMP Age, there can already, under current State Pension arrangements, be a period of time during which the GMP portion of an APS/NAPS pension is not receiving equivalent increases from the State.

The introduction of the New State Pension (NSP) from 6th April 2016 removes the concept of contracting out and the AC, and replaces these benefits with a single flat rate State Pension. Consequently, as there will no longer be an earnings related element of the pension, the State will no longer apply annual increases in the manner described above. Future increases will instead be applied by the State to the NSP amount. APS/NAPS will continue to pay increases required by legislation on GMP amounts until GMP Age.

BA Pensions say the Government maintains that most individuals will be better off under the new arrangements: the NSP is higher than the current State Pension and both now will rise with a ‘triple lock’ guarantee (the highest of the CPI increase, the increase in National Average Earnings, or 2.5%). The Government believes that these two elements will, for most members, mitigate the loss caused by the State no longer increasing the relevant amount to one’s GMP.

However, APS/NAPS members reaching State Pension Age shortly after April 2016 will have limited time to build up NSP by paying National Insurance (NI) contributions or securing NI credits. There is an obscure calculation applied that seems to result in many who contracted out receiving a state pension amount equivalent to the old state pension, not the higher new state pension!
This is all very complicated, so here are some real examples.

Persons A, B and C worked for BA over a time period that included the entire Pre88 and Post88 periods (ie 6 April 1978 to 5 April 1997). Their Pre 88 GMPs are £2,938, £2,610 and £1,887 respectively. From 6 April 2016 that amount of their annual APS pension will rise by 0%, not CPI, once they have reached GMP age (this remains 65 for men, 60 for women), for the rest of their lives. Their Post 88 GMPs are £1,885, £2,040 and £1,628 respectively. From 6 April 2016 that amount of their APS pension will rise by CPI capped at 3%, once they have reached GMP age, also for the rest of their lives. Person A is 65 this August. If he lives another 20 years and CPI inflation is always 2% a year, he would lose about 3.6 months’ APS pension due to the GMP effect. If he lives another 20 years and CPI inflation is always 4% a year, he would lose about 9.2 months’ APS pension due to the GMP effect.

Person A and Person B reach state pension age in August 2016 and November 2016 respectively. Both their state pension quotes from the Department of Work and Pensions are at the old (ie current) state pension level, not the new state pension, due to their contracting out.

These 3 examples have good APS pensions. The ABAP committee is more concerned about those on lower APS/NAPS pensions. If their GMP is a higher proportion of their total APS/NAPS pension than our 3 examples, then the GMP effect will be bigger; more months’ pension will be lost than the 3.6 months (2% CPI inflation) or 9.2 months (4% CPI inflation) for Person A.

BA Pensions stresses that the APS/NAPS rules have not been changed. The change has been made by the Government, not the BA Pension Trustees. BA Pensions is liaising with the Pensions and Lifetime Savings Association and the Department of Work and Pensions on this issue.

In summary, if you reach state pension age on or after April 6 2016:
• Your full APS & NAPS pension will increase by whatever annual rises are applied, up to age 65 for men and age 60 for women
• Subsequently, the GMP built up from 6th April 1978 to 5th April 1988 will cease to increase and the GMP built up from 6th April 1988 to 5th April 1997 will increase by a maximum of 3% per year.
• Having been contracted out, BA staff will most likely begin with an entitlement to the foundation rate of the new state pension (currently around £116 per week). Up to state pension age, additional state pension can be earned (up to the full amount, expected to be around £155 per week) by making qualifying National Insurance contributions from any form of UK employment.

While reform aimed at simplifying a complex pension system is welcome, it’s apparent that there are significant losers in the process. Of particular concern is the discriminatory nature of the GMP ages for men and women.

The GMP calculations are complex and members who are affected by this are advised that whilst BA Pensions should be able to give general guidance on what their individual position may be on reaching GMP age, specific personal projections cannot be provided because not all the factors involved in individual calculations will be known. In a low inflation era, the effect of GMP may seem insignificant but as we well know from the RPI vs CPI debate, the effect of compounding is considerable. Should inflation increase, then the effects of GMP become very much greater.

If you want to contact The Department for Work and Pensions for questions about the new State Pension or to ask for a statement you can ring the number shown in this link:
https://www.gov.uk/future-pension-centre, Monday to Friday between 8am and 6pm.



~~~~~~~~~~