Extract from latest NTUS Circular. It's gotta be worth a no vote on pay.
14th May 2009
Mr John Devaney
5th Floor South,
Brettenham House,
Lancaster Place,
London, WC2E 7EN
Dear John,
I am writing on behalf of the Prospect and PCS to express our concerns regarding two significant and high profile issues namely NATS contribution rate to the NATS Section of CAAPS and the decision to pay out £43.5m in dividends to the shareholders. These two issues cause the NTUS and our members real concern and we fail to understand the rationale and decisions made by the board. For clarity I set out our concerns on these two issues below.
Pension contribution
As you will no doubt be aware the NTUS has been engaged with NATS for over two years examining the position of the NATS Section of CAAPS (the Scheme) and the ability of the business to support its obligations to the Scheme. Having considered all the information on the Scheme and its relationship with the business we came to the conclusion that, in order to protect both the Scheme and the business it was necessary to take some action and we agreed jointly, with NATS, a way forward. The NTUS then went about explaining to our members (NATS staff) the need for action and explained the proposed course of action to be taken. The action agreed by our members means the potential risk to the business is reduced. However, this is achieved through our members agreeing to the potential for a reduction in pension growth. Additionally we have agreed to a two tier pension arrangement with the introduction of a new, defined contribution, scheme. This was, for us, a huge leap of faith but something we felt was necessary and therefore required us to act responsibly – which the NTUS and its members have done and continue to do.
Given the current state of the Scheme, as outlined below, it was our expectation that NATS would be increasing the contribution rate immediately (following the interim valuation) to 30% of pensionable pay into the Scheme. Indeed this was one of several figures that were mentioned by NATS, if the Scheme were to be in such a state, whilst we were jointly explaining the proposal to our members.
The December 2008 draft actuarial valuation of the Scheme identified the following:
Without the MoU With the MoU
Funding level: 72% Funding level: 76%
Deficit: £910m Deficit: £700m
Underlying Rate: 44% Underlying Rate: 38%
Indeed as part of NATS consultation process with staff, NATS made it clear that it was their understanding that if the Scheme were no longer in surplus that they would have to pay at least the underlying cost of the Scheme. Against that backdrop we do not consider increasing
the contribution rate simply to 25% to be in the best interests of our members, the Scheme or NATS and therefore this course of action is not acting responsibly. We would urge the Board to reconsider the planned arrangement, to increase the pension contribution rate to 25% for 2009 and then to 30% for 2010, and consider moving to a 30% contribution rate immediately and then increasing the rate to 35% or greater depending on the Employer’s underlying contribution rate.
If following the results of the Triennial Report NATS, in the opinion of the NTUS, do not fulfil the obligations incumbent upon them, and which were made as part of the joint pension briefings (with reference to NATS paying the full underlying rate), the NTUS will have no choice but to consider action (including industrial action) to safeguard the future pension provision of our members.
The above comments are further compounded by the potential level of deficit within the Scheme and what appears to be a lack of urgency with regard to addressing the underlying funding requirements of the Scheme as well as the deficit. I am sure that you are aware of the recent pronouncements of the Pensions Regulator with regard to this issue and in particular that “pension recovery plan(s) should not suffer, for example, in order to enable companies to continue paying dividends to shareholders”.
Shareholder dividend
On this issue the NTUS and our members are incredulous at the dividend payment demanded by the Board for its shareholders. Given the current economic climate and the downturn in traffic together with the £45m costs NERL is looking to take out of the company (based on its strategy for Control Period 3); add to this the state of contracts within NSL and the current state of the NATS Section of CAAPS; then the decision to pay out £43.5m leaves us stunned. We understand the expectation of shareholders to get a return on their investments even though this venture was entered into with a view of not receiving commercial gain. However to extract £43.5m cash out of the business at a time when we are facing the likelihood of a significant negative RPI (and the impact this will have on NERL’s pricing) together with the downturn in traffic does indeed cause the NTUS and our members real concern and as such we have to question the thinking behind the decision by the Board.
I hope you are able to understand the weight these two issues have with the NTUS and our members – we are all stakeholders here and we wish to see a successful NATS – a NATS that is sustainable and provides an excellent service whilst providing good jobs and job security with good pay, terms and conditions and pensions.
I look forward to your response.
Yours sincerely
Suresh Tewari
CC. Peter Read Chairman Airline Group
Sigurd Reinton Director
Brenda Dean Director