BA pension deficit £3.7bn....!

[MikeAlphaTangoTango]

...is that survivable? :bored:

BA discloses extent of pension deficit (http://www.flightglobal.com/articles/2009/12/14/336120/ba-discloses-extent-of-pension-deficit.html)

[BALLSOUT]

I would say they are probably insolvent, thay need to find agreemet with the employees to reduce this or call in the insolvency practitioners.

[Otterman]

Gross mismanagement, and as usual the bill will be dropped on the real employees, not the thieving upper management, their parachutes are still lined with gold.

[BoeingMEL]

This ol' timer holds BA's cabin-crew in high regard... and respects that they may have grounds for grievance. But BA is now a pretty fragile outfit that needs every single pax. This is no time for a strike folks... the proposed amended/reduced terms seem to be a lot better than state benefits...IMHO.

No Pyrrhic victory ever paid the rent. Cheers bm:ugh:

[Hotel Mode]

Gross mismanagement, and as usual the bill will be dropped on the real employees, not the thieving upper management, their parachutes are still lined with gold

So are no other defined benefit scheme affected? BT, Post Office, Network Rail etc etc. You clearly have internet access, why arent you better informed?

[Otterman]

The BA deficit is not a story of recent times, it dates back way before any financial crisis. The management has used this issue in the past to make a significant change in the T&C’s of the flight crews. They have done nothing to rectify the situation. Management is now going to use the current dire state to stuff the latest downward spiral in T&C’s on everyone. And as the Anglo-Saxon management model requires, they will make sure their T&C’s won’t be affected.

[Hotel Mode]

And as the Anglo-Saxon management model requires, they will make sure their T&C’s won’t be affected.

Fortunately I belong to an intelligent union, who are well aware of the possible shenanigans, and will spot them a mile off. I dont expect they will be minded to bail out a less progressive union, that failed to turn up to critical meetings, like they did last time.

[OrryFace]

For those of you still in employ, the pension may seem like a long way away, but it creeps round closer than you think. This is a more important issue for all of us than the short term issue of how many cc are on board.
In case you had not notice, earlier this year the whole ball game on staff travel for retirees was changed to the detriment of those with shorter service and expectations of longer life.
Previously retirees enjoyed lifetime staff travel. Now it is limited to the equivalent period as your length of service. The big issue is that this was done retroactively and applies to all. So those who chose early retirement in recent years on the promise of a lifetime benefit as part of the sweetner package, have now been dumped on.
You may also have noticed that the poor guys at JAL are fighting to stop their pensions being cut by 40% due to the fund deficit. This applies to existing as well as future pensioners.
Who knows where this will end?
Happy times.

[Airbus Unplugged]

- BA took several years pension holiday, depriving the scheme of funds when the Sun shone.
- BA has continually sought to split the schemes APS, APS1, NAPS, BARP to split liabilities and isolate groups to fight one against the other.
- Other schemes, notably Boots switched from equities to bonds early in the market crisis, neatly sidestepping the worst of the damage. Pity we never had inspired guidance like that.


- And one last one that knocks all the others inot a cocked hat:

Gordon Brown and his cronies began plundering the pension wealth of every scheme in the UK as soon as they came to office. Persecuting the wise and the careful to give without measure to the feckless and irresponsible, firehosing the public sector with billions of pounds.

When all the family silver was gone, he mortgaged and borrowed his way to bankruptcy, and sold every treasure we had. Even the Bolsheviks were never so reckless.

Wasted, every :mad: penny. There are no words to describe the iniquity of them. We will never recover.

[Basil]

Airbus Unplugged,
Backathenet! :ok:
Wonder if Massimo Tartaglia could get over here and wield the Angel of the North instead of his little model of Milan Cathedral. :}

[Carnage Matey!]

BA has never taken a payment holiday from NAPS, and at least one of the payment holidays from APS was a legal requirement as the fund was in surplus and continued payments were not permissible. The blame for this falls mostly at the door of one Mr G Brown.

[Ancient Observer]

In the context of a pension fund such as BA's various schemes, so-called "payment holidays" are a red herring. The various Co.s that have taken payment holidays may have saved them selves a few million.
That is LESS than the rounding errors that the actuary uses to cost the liabilities.
Payment holidays for BA were few and far between, and as CM points out, at least one of them was due to Mr G Brown's laws.

[Basil]

Never forget that, ten years ago, BA tried to raid APS to make up the deficiency in NAPS. At a huge meeting in Waterworld we had to threaten 'direct action' in order to have OUR say on the platform.

I 'helped out' in the eighties by paying the BA contribution for four years - just before BA took a contribution holiday.

Willie, don't even THINK of asking the pensioners for help!

[Joetom]

Unions allowed pensions to be watered down in 2007, part of the deal was flying staff got a nice increase in their pensions, all ground staff accepted a very bad deal.

Now with so many different staff on different pension deals can only mean close all the old ones and try to maintain at least one pension deal.

Company 1, Unions 0.

Will have to be fixed by Apr 2011 at the latest, more like Jun 2010 will be the date.

Good luck to all the staff in the near future.

[blimey]

Few, that's a relief. I'd heard it was going to be £3.9 billion.

[lpatrick]

Airbus unplugged needs to check his facts. The tax credits on pension funds were almost completely abolished by Norman Lamont in the last Conservative Government. It's only the Daily Mail and similar that tries to lay the blame on Gordon Brown for political reasons.

For an independent non political explanation of how the deficits come about I can recommend www.opalliance.org.uk/decline.htm (http://www.opalliance.org.uk/decline.htm)

Best if we keep politics out of the forum surely ?

[M.Mouse]

Willie, don't even THINK of asking the pensioners for help!

If you think that the problem is just BA's then I suggest you may have a shock in store.



Airbus Unplugged

Investment strategies are determined by the fund's profile and is not a wholly free choice of fund managers but well done for a hat trick of false assertions.



Pension contribution holidays were a legal requirement when BA last took one, and that was for APS not NAPS. It was illegal to continue paying in to a fully funded scheme.

Gordon Brown removed Advance Corporation Tax Relief in 1997, that has been costing pansion funds around £5bn p.a. since.

BA cannot afford to put more into the pension funds than it is already doing. The last ten year plan saw BA's already massive contributions upped by £170m p.a. I am sure it has not escaped attention but BA is losing money hand over fist at the moment.

joetom

You keep repeating ...... in 2007, part of the deal was flying staff got a nice increase in their pensions.... That assertion is untrue and you are sadly misinformed if you believe otherwise.

[Basil]

MM,
If you think that the problem is just BA's then I suggest you may have a shock in store.
Not sure what you mean.

[Walnut]

Take a deep look at these numbers guys. In 3yrs NAPS went from a £2.1B to a £2,7B deficit whilst APS went from £22M to £1BM deficit. So why should APS which is largely 95% closed have a much larger deficit????
Either BA is being very economical with the truth re the NAPS deficit, or maybe some cross fertilisation is taking place between the funds.
One other oddity is that the trustees expect NAPS to grow at 2.5% whist APS is only growing at .5%. Also the chairman of the trustees is resigning Roger Maynard, why? I am very unhappy with this report and feel others should start asking serious questions.

[M.Mouse]

The Actuarial Valuation is carried out by independent actuaries. I assume that the relative fund growths are dependent on the investment profile of the respective funds. That investment profile is also determined by legal constraints which vary with the makeup of the scheme members.

Roger Maynard is resigning because of his position with the pending Iberia merger. The BA pilot's elected trustee is very sorry to seem him go and feels his skill, knowledge and expertise will be difficult to replace. He also feels he could have remained. It is a mark of the man's integrity (now there is a quality we rarely see these days) that he is resigning at this point.

[Walnut]

You state the valuations have been carried out by independant actuaries. True, but in the Trustees statement this comment was made.


Both the valuation and the recovery plan are subject to review and approval by the Pensions Regulator. The Regulator has had only limited information, and has not had the opportunity to carry out a detailed assessment of the assumptions used. The Regulator’s provisional view is that the technical provisions may be materially below a level it feels appropriate. The trustees and BA look forward to working with the Regulator to complete a detailed
review.

The large divergance between APS & NAPS is I believe caused by the different discount rates used for the two schemes. In APS 4.6% was used in NAPS 6.1% was used. It stretches credibility that the NAPS scheme is going to grow at 6.1% in current times.

ie BA is trying to put a favourable spin on these numbers

[bermudatriangle]

deficit comes as no surprise to me,some BA captains have pension pots of around 1.8 million....yes million.just do the sums,number of pilots,pension pots and you can see where the pension deficit lies.

[virgo]

Does anyone know............Assuming the worst case that BA is made insolvent and re-formed as a different company, will existing BA pensions - both groups - be protected ?

[Mr Optimistic]

...that's not what it says on the link you provided viz.

'In 1993 Norman Lamont reduced the value of tax credit on share dividend payments for pension schemes to 25% which later provided Gordon Brown with the idea of abolishing it altogether.'

I was happy with the 25% mate (cf the 0% the class warrior imposed so he could support 'his people').

'Best if we keep politics out of the forum surely ? '

So why do it ?

I don't know what reserves the pension scheme protection thingy has, but I hope it doesn't have to bail out these BA deficits otherwise the levy will hit us all.

[TopBunk]

Let's not forget in all of this, that even the BA NAPS scheme is still about 80% funded, and it is the deficit we are talking about, which is a notional long term issue.

The valuation process is designed to identify a way forward.

The pension deficit does not impact directly on the ability of BA to trade, but the size if the funding required to satisfy the regulator and the ability of BA to pay will determine the split between the money BA pay to service accrued benefits and future benefits. This will drive the changes necessary to future benefits. It is not necessarily cheaper to discontinue the scheme.

That's as I understand it, anyway ....

[bermudatriangle]

despite my previous post being deleted....i state once again,i over heard 2 ba pilots discussing their pensions,both of which exceeded 1.8 million pounds,yes pounds in their pension pots.from those figures i can deduce where the pension deficit lies....the huge pension liabilities owing to the pilots,its dead simple.

[M.Mouse]

Perhaps it was deleted because you clearly understand nothing about pension funds if you believe that is the problem.

[ScotsAndy]

Its obvious some of you don't understand Pensions.

A pensions pot of £1.8M, assuming it was a Final salary related pension scheme simply identifies the level of funds required to meet the liability that has built up in respect of the member of the scheme. These type of schemes bear the investment risk, not the individual, as in money purchase arrangements.

The shortfall in solvency of the scheme relates to the inability of the Employer/Trustees to have met the funding requirements of ensuring 100% solvency of the scheme - due to either the failure of investment growth, insufficient employer funding and/or the fact folks are living longer !

Probably a combination of all three (and a lot of other factors) !

It is unfair and disengenious to slur the pilots involved - they are members of a scheme originally designed to meet the promises made to them of a healthy retirement - a commitment made to them as part of their contract - it's just very expensive !

[Rainboe]

This is so much more important:
http://pict.com/expo/3660311/5742adb005

[Basil]

MM,
Roger Maynard . . . The BA pilot's elected trustee is very sorry to seem him go and feels his skill, knowledge and expertise will be difficult to replace.
High praise and if that's what the pilots' trustee says then I too am sorry to see him go.

[Mr Optimistic]

Can't see the £1.8M accrual being right. Notional calculations of funding levels typically work at 5% (nice work if you can get it). £1.8M implies an annual pension of £90k, which at two thirds of earnings means current salary of about £130k. If these numbers are in fact right it explains a lot of BA's problems, pension and otherwise.

[Trident Sim]

Can't see the £1.8M accrual being right.

Agreed, in many cases the correct figure is likely to be higher, in some cases considerably so!

Notional calculations of funding levels typically work at 5% (nice work if you can get it). £1.8M implies an annual pension of £90k, which at two thirds of earnings means current salary of about £130k.

And your point is?

Current basic top rate for a 24yr BA B777 Captain is £144,448 pa.

Instructors and checkers earn more, as do management pilots, and their CITV's will be correspondingly higher.

If these numbers are in fact right it explains a lot of BA's problems, pension and otherwise.

And your point is?

Please see previous posts from ScotsAndy, Rainboe and M Mouse for some enlightenment on the topic.

[Mr Optimistic]

....to get an answer confirming the calculations, so thanks.

[MATELO]

""Current basic top rate for a 24yr BA B777 Captain is £144,448 pa""

24 yr Captain may have been working for BA for about 35 Years. So, that would work out an average of about £4200 a month. Now, if a pilot was frugal, that £1.8m may just be correct.

The problem is world wide, not just with BA. Everybody is feeling the "penny pinch" and cutting cloths as appropriate. Somebody will have to pay, but as usual, its the staff on the lower wages and worst contracts who will feel the full force.

[Mr Optimistic]

Currently, MPs with 20 years' service can retire on a pension of £30,000 a year. The average private sector pension is about £25,000.

[Rainboe]

I told you this was more important[URL="http://pict.com/expo/3660311/5742adb005"]

[Mr Optimistic]

Hiya, go easy, I was just applying the standard terms (two thirds of salary for 40 years service) generally applying to industry. I actually thought the numbers were too high so was expecting praise for a correction. Unfortunately got it wrong so had to duck smartly. Oh well, live and learn. Defined benefits schemes now seem so optimistic in those long ago promises made. To think the UK was self-satisfied at having better pensions than Europe just a decade or so ago but that was before GB saved the world.

[sky9]

A report in the Telegraph
Pilots at British Airways move millions out of company pension - Telegraph (http://www.telegraph.co.uk/finance/personalfinance/6817264/Pilots-at-British-Airways-move-millions-out-of-company-pension.html)

[koi]

Rainboe,

Meyhinks you are so wrong. Do have a look around at exactly what is happening to other airlines and their p-schemes. You can forget existing protections ring fences, guarantees and actuarial assurances. The mathematics are clear and damage limitation will be the order in future, for the sake of the business and the existing employees. Expect a dismantling of the existing schemes, a money pot in own name and go to market is the only clear way out for BA.
King was the fella when I was at Hamble, Ayling came in with a remit to break the unions. The independants all waited to see the inevitable. Perhaps the self destruct button has just been pressed.
Koi of 744

[RHINO]

Koi,

save your breath, Rainboe will be the last to realise......

[jumpjet7]

The BA deficit is no different to many of the independents. A large portion of guys have already taken large pots from various companies. The recent drop in gilt yeilds has pushed valuations up 40-50% in some cases. The largest pot taken in my airline is 2.5 million.

Some fear future legislation that would allow companies to walk away from liabilities could creep in especially if the goverment were to run out of money. Cutting the public sector pension liabilty and freeing up business at the same time? Can anyone see the post baby boomers avin it so good?

Just a thought.

[Mr Optimistic]

Try to imagine saving £1.8M after taxes over a lifetime. Can't be done. That's why the easy promise ('we will pay you 66% of your salary for the rest of your natural ' ) came unstuck. Those promises were made as part of what was effectively a pyramid selling scheme (DB pensions generally) and now they are going the same way as the old endowment mortgages which offered daft bonuses over a 25 year term as a sprat to catch teh mackeral. Odd, it was an Equitable Life agent who told me this and I still bought the contract. Dummy.

[ScotsAndy]

The real killer for defined benefit pension schemes is :

a) the unfortunate fact we are all (on average !) living longer, hence an annuity when bought, has to be purchased in the context that it may have to be paid for 30 odd years. Not so long ago we were all falling off our perch much earlier

b) very poor investment returns (albeit the last 6 months have been pretty spectacular - but will that last ?)

c) The Labout government (and for that matter any governments) refusal to set a stable platform for developing retirement income for the majority of the population

d) Extremely low interest rates forcing up the cost of buying a £ of pension

e) The short sighted and self serving attitude of Trustees and Employers in allowing contribution holidays in the past.

f) a host of other reasons inluding tax implications

These issues are solvable but it needs a willingness on all (including the Government of the day, Employers, Unions and individuals to work together to arrive at a solution.

In light of that I think we can assume defined benefit schemes and the security they provide are doomed - pity.

Still, I suppose change is the only constant !

[MATELO]

Vaild points Andy.

However, you missed the big one out. The baby boomers coming into pensionable age.

[Walnut]

A report in the Telegraph
Pilots at British Airways move millions out of company pension - Telegraph (http://www.telegraph.co.uk/finance/personalfinance/6817264/Pilots-at-British-Airways-move-millions-out-of-company-pension.html)

If this is true?? then those on the inside must indeed be worried. As the scheme is in deficit, in the case of NAPS about 45%, then the trustees are required to reduce the capital sum of the withdrawal by a proportional amount. This is a huge hit to take.

[ZeBedie]

The existing situation whereby the pensionners get everthing and the people below pension age get the leftovers is unfair and unsustainable. I hope to see legislation to bring justice to the situation, invloving a reduction of pensions for those already retired.

[M.Mouse]

The existing situation whereby the pensionners get everthing and the people below pension age get the leftovers is unfair and unsustainable. I hope to see legislation to bring justice to the situation, invloving a reduction of pensions for those already retired.

So a person in their 30s with perhaps another 35 years of ability to earn money should be protected from future pension loss by reducing the pension income of a 75 year old retiree?

Very fair.

[ZeBedie]

So a person in their 30s with perhaps another 35 years of ability to earn money should be protected from future pension loss by reducing the pension income of a 75 year old retiree?

Very fair.

Yes, why should the old one take the youngster's pension? Both should get an equal percentage of the pot, based on what they've put in, as opposed to the current situation where you may have a 61 year-old, who gets full pension and a 59 year-old who gets nothing, even though the younger one may possibly have paid more into the scheme.

[Tercarley]

Percentage-wise of his actual salary the older person may have paid in more!!! In AVC's etc.

[M.Mouse]

....have a 61 year-old, who gets full pension and a 59 year-old who gets nothing,.

The 59 year old would not get 'nothing'. A graduated system would be acceptable bit my pooint remains that a 30 year old will have many years earning to make adequate provision for retirement whereas a pensioner (or 59 year old) has no such luxury. There is of course the Pension Protection Fund as well.

[Jumbo Driver]

Just wait until ZeBedie is retired - then his views will suddenly change ... as if by magic ...

I've heard it all before ...


JD
;)

[Walnut]

<<<<The existing situation whereby the pensionners get everthing and the people below pension age get the leftovers is unfair and unsustainable. I hope to see legislation to bring justice to the situation, invloving a reduction of pensions for those already retired<<<<<


The current provisions are the only workable system. Once a guy retires his pot is frozen & he is paid according to the rules. The scheme overall may not have sufficient funds to pay all the liabilities, but the 30yr old does not need or even have the right to the money for many years. As long as the employer eventually makes good the shortfall then the 30yr old does not have a case.

[Certa Cito]

As long as the employer eventually makes good the shortfall

Aha! and therein lies the problem!!!!!!!!!

[HamishMcBush]

Depends on the meaning of "eventually", surely ?