3rd August 2010
Contents:
1. Meeting with Chairman of Trustees
2. Pension Schemes Recovery Plan
3. Consumer Price Index
4. Variable Pension Update
5. APS & NAPS Pensioner Trustee Elections
6. Touchdown Magazine Future
7. Subscriptions Reminder
1. Meeting with Chairman of Trustees Mr Paul Spencer CBE (Dayne Markham)
Members will recall that ABAP had been calling for an independent Chairman for some time. The meeting delay has been caused by the heavy workload at BA pensions in finalising the deficit; then working with BA, Iberia, and the Pensions Regulator(TPR) over the ensuing months to agree the Schemes' deficit recovery plan. Not until these items were in the bag was there the opportunity to meet the, by now, somewhat campaign-seasoned Mr Spencer.
The meeting was cordial & much clarification of the issues concerned was made. ABAP expressed concern over the ability of the scheme recovery plans to withstand adverse events. This had been raised by the Committee & the Membership at large. The Trustees have been fully appraised of the risks involved. Equities held now stand at 18%. The long term aims for APS & NAPS, but of course with different time scales, was for a fully funded self sufficient scheme in risk free gilts. The recent Rothesay Buy-In transaction was an example of the de-risking strategy covering 20% of Pension In Payment liabilities covering the increasing longevity risk, matching pension cash flows in all scenarios of inflation/deflation & interest rates.
A discussion on the possibility of the Variable Pension Option issue returning to the Trustees decided to carry on with the Ombudsman process as it was so far advanced; and then consider the recommendations.
On the balance of the member nominated trustees (MNT) on both APS & NAPS the balance was at last moving and would be kept under review with the quality of Trustees essential as well as the ratio.
The voting franchise for Scheme Widows at MNT elections was raised and will be further discussed by the Trustees.
The new issue of the Government directive on the substitute of the Consumer Price Index(CPI) in place of the Retail Price Index (RPI) was discussed. The ABAP position was made clear. The Trustees are considering the matter in light of advice being received. If BA were to benefit from any windfall from the change this would be ensured to be applied to benefit the Schemes.
It was confirmed that the Pensions Regulator (TPR) continues to take a keen interest in BA pensions as would be expected in such a large scheme.
All-in-all, after this meeting ABAP feels that the appointment of an independent Chairman of Trustees holds out the clear possibility of the biggest advance at BA Pensions since the implementation of Part VI in the 70s. Mr Spencer brings with him a wealth of most welcome broad based high level experience which gives increased confidence for BA Pensioners in the Schemes' future.
2. APS & NAPS Schemes Recovery Plan
The Chairman of Trustees has written to all Members & Pensioners in detail on the Schemes 2009 Valuation & the Recovery Plan that has finally been achieved. The deficits have been improved by the upturn in the markets. Nonetheless, ABAP has been concerned for the strength of the plan to withstand adverse events. We have been reassured that the plans have been made as secure as feasible. The Rothesay Buy-In having already started paying into BA Pensions to increase the reach of the scheme into the distant years ahead as we live longer and longer.
As an illustration: It is forecast that HM The Queen will send out 75000 centenarian greetings in 2050.
ABAP is conducting independent research on the Buy-In scene. It is important that we are kept appraised of the progress of the Recovery.
ABAP has active volunteers in UK & Abroad, for which all members should be grateful, who monitor relevant financial activity on the web.
3. Consumer Price Index : Government Directive. (David Waddington)
Initially upon hearing of the HMG proposal to use the Consumer Price Index (CPI) as the marker governing annual pension inflation increases it was presumed to apply only to those pensions paid by HMG.
When it transpired as part of the “We Are All In This Together” Coalition philosophy that this proposal would also apply to pension schemes in the private sector, out of a sense of “Fairness”, ABAP felt that this was not well thought through. We continue to do so, as far from being “Fair“, it was not fair at all to many older pensioners in many of the private schemes.
The Retail Price Index (RPI) has been in use for many years by all schemes as a measure of Inflation. Clearly it is in any government’s interest to keep this figure as low as possible without it being completely debased. In practice under all governments the RPI was politically shaved by essentially what they could get away with, and CPI will be subject to exactly the same pressures.
This has meant that over, say, 15 years, under-calling the RPI (when compared to the real, effective rate of inflation), has reduced the purchasing power of long-time pensioners by some 20% just when their personal costs are tending to go up due to age.
The proposal to use the CPI for all schemes to ease the financial burden of pension schemes, on the face of it sounds very laudable, as the CPI tends to be a lower figure than the RPI by definition as it does not include mortgage interest. However, use of the lower CPI figure will worsen the loss of purchasing power of the older pensioner, and whether pensioners still have a mortgage is not relevant.
ABAP therefore does not support the substitution of RPI by CPI in any private pensions as it does not in fact produce “fairness”; for older members it increases the erosion of pension purchasing power.
In the case of BA Pensions, where Herculean efforts have been made to arrive at an achievable Recovery Plan, it is worth noting that this plan was constructed with RPI in mind as the index. Completion of this plan preceded the proposal for the national use of CPI in all schemes.
Therefore the Association supports the BA Pensions Recovery Plan, provided that adequate safeguards are in place, and sees no further disadvantage for pensioners, or further danger to the schemes, by continuing along RPI lines.
We shall be informing the Chancellor, the Pensions Regulator and the Department of Work & Pensions (both the Secretary of State Iain Duncan-Smith, MP, and the Minister for Pensions, Steve Webb MP) accordingly.
The Committee of ABAP
23 July 2010.
4. Variable Pension Option: Update ( Dayne Markham)
Members will recall that although the ABAP complaint has been lodged with the Pensions Ombudsman it was vital that it was underpinned by a complaint by a recent VPO pensioner. This complaint then had to go through the Internal Complaints Procedure at BA Pensions. Although Members & BA Pensions are fully aware that ABAP has been complaining about the VPO for some years it is procedurally necessary to do this step. Regrettably it has taken some 6 months to progress through the Trustees. As expected the complaint was rejected, but an important clarification was gained in the process.
The committee of the Trustees who consider the complaint only do so to see that the Rules governing the operation of the VPO are correctly carried out. If they are, then the complaint can only be rejected. Of course ABAP has always campaigned for VPO rule changes. It is now seen how some of the apparent prevarication & misunderstanding on both sides on this issue may have happened. When the full Board changes the VPO Rules, the complaint will be reconsidered in a new light. The Ombudsman will use his powers to recommend any changes to those Rules following our complaint. ABAP is continually updating the detail of the complaint through our legal advisers as it is processed by the Ombudsman. ABAP has and will continue to remind the Ombudsman that specific VPO Rule changes are necessary.
5.APS & NAPS Pensioner Trustee Elected Trustees
Sandra Sellers the recent past Chairman of ABAP and pensions professional known to all members is standing for a new APS Pensioner Trustee vacancy.
Geoff Le Boutillier is standing for re election as the NAPS Pensioner Trustee.
Members are requested to fully support both these candidates.
ABAP has run a long campaign for additional APS & NAPS Pensioner Trustees as more members become pensioners in both schemes. The APS Trustees have taken this opportunity to hold a new APS Pensioner Trustee Election upon the retirement of Mr Alan Bromwich, the longest serving Trustee in BA pensions history-covering 2 decades of unwavering service. ABAP wishes him well and looks forward to warmly welcoming him as a member shortly.
In addition we are advised that there will be another NAPS Pensioner Trustee vacancy shortly following a necessary NAPS Rule change .
6.Touchdown Magazine. (John Bennington & Dayne Markham)
We all know that if BA is to survive as an airline, and not just as a memory, it must pull out of the nosedive that continues down ever nearer the financial safety height. ABAP has learned that even with all the evidence of cost-cutting of the Touchdown magazine to date it is likely to be of no avail and that the pensioners magazine will fold in 2011.
In co operation with BA & the knowledge of other BA pensioner groups ABAP is proposing putting together a plan for BA pensioners to run their own replacement magazine. ABAP would put the mechanism together and progressively stand back as the magazine momentum builds up. It would be published quarterly for a small newspaper type subscription paid to the magazine bank account by telephone transfer. Each feature would have a page compiled by a sub editor. Theses pages would be sent to a Compiler or Editor. BA would retain an interest but essentially the Magazine would be By Pensioners For Pensioners with initially about 20 pages. Politics would not feature. It may not be possible to use the existing title. We need another title ready to use. “ In Contact !” might be available.
Of course without a great deal of support from pensioners the idea will not lift off. We need to find sub editors & an Editor/Compiler, preferably pensioners with some useful experience.
In the first place write to:
ABAP Chairman C/O Unit 10 Solent Ind Est Hedge End Southampton SO30 2FX
Or phone Dayne Markham 01489 782 637
Or email daynemarkham@hotmail.com also FAO John Bennington.
7. ABAP Subscriptions 2010/2011.( Jack Shill)
Most of find it difficult to believe that 2010/2011 subscriptions are due already.
Please use telephone transfer to the ABAP account:
Sort Code 20-11-74
A/C No 70180769 adding your Staff No. Initial & Surname.
Or post the form enclosed with the Newsbrief, or download from the website here.
Many Thanks for your Support.
But Be Warned, Christmas shopping starts soon!
The Committee of ABAP 3rd August 2010