The way I see it, here is how it goes:
The underlying cost is what it will cost NATS to provide
future benefits to all members if there was
no surplus (i.e.100% funded)
100% funding means that there is enough going in to meet
CURRENT outgoings from the fund paid in at a particular rate(
lets call this rate value F%)
If there is a surplus, there is more being paid in than going out, to meet
current commitments, and a deficit means the opposite.
What NATS have done over the last few years is made it their aim to bring value of the down to 100% funding (i.e paid in=paid out), so instead of paying F%, they have paid in less and alowed the surplus make up the difference and thus causing it to dwindle down (now looking like a deficit)
Here's my biggest problem with the way the fund is portrayed:
Why the heck are we aiming for 100% funding when the underlying cost is what needs to be paid to ensure
future liabilities are met?
100% funding rate will
ALWAYS be much lower than the underlying rate, simply because
future outgoings are going to be
much higher than current outgoings.
NATS management are feeding us crap about the underlying rate being so high, yet base their contributions on the
current funding
This means that the underlying costs will continue to go up
every year as NATS will always be paying in less than what is required to keep the fund viable in the
future.
so bloody NATS got us into this mess because they were paying in much less than the underlying rate (future obligations), indeed, were paying in less than what is required to meet current obligations, using the surplus to make up the difference
100% funding is a load of crock and is merely the actuaries equivalent od rose tinted specs:
In the form of a play
NATS:"hey, we have enough money to pay our current commitments and we will pay in just the right amount to maintain this. Aren't we great?"
LITTLE TIMMY: "but what about the future?"
NATS:" yeah, erm, well... erm, oh dear we haven't been paying enough to meet future needs. We'd better tell everybody that we need to pay in a lot more just so that we have enough money in the pot to pay future pensioners"
LITTLE TIMMY:"but you paid less in than what you needed to ensure there was enough cash in the pot to pay future pensioners. Isn't it your fault?"
NATS:"well...yes, erm..we can afford to pay it but we don't want to. We're just going to have to scare everyone into taking less when they retire and so we won;t need to have such a big pot of cash in the future"
THE END