NATS 2001 pension holiday. A reminder.
NATS 2001 pension holiday. A reminder.
I found this on a closed thread and thought it may be of interest.
"I have produced the following fact sheet in order to provide information to NATS members of the CAA Pension Scheme (CAAPS) regarding the current proposals by NATS for an employer’s pension contribution holiday and some benefit improvements. These are to be paid for from the past service surplus, identified by the Scheme’s actuary at his 31 March 2001 valuation updated at 30 September to take account of investment market fluctuations during the intervening period. In view of these proposals the member Trustees of the CAA Pension Scheme are extremely concerned about the security of the future funding of the Pension Scheme, and I believe we have now reached a watershed in the life cycle of the Scheme.
Barry Gibbs (retired members’ Trustee) and myself sent e-mails to members of the Trade Unions Side of the NATS Pensions Committee, prior to its reconvened meeting on 13 November, reiterating our previously expressed views, endorsed by the other member Trustees, strongly advising the TUS against accepting either a contribution holiday or benefit improvements, at this point in time. Our reasons were contained in an earlier fact sheet, distributed to them at the Pensions Committee Meeting held on 19 October, which are highlighted by the following points:
1. The surplus being considered is the past service surplus, which takes no account of future service liabilities.
2. Following previous valuations the past service surplus has been used to meet future service liabilities before the residual (net surplus) has been considered for distribution.
3. Neither the employer nor the TUS has ever before suggested that the gross surplus should be the one open to negotiation, by the Pensions Committee, for distribution.
4. This will be the first time, within my memory, that the gross surplus is insufficient to meet future service liabilities. (Estimated deficit of £275.5m).
5. Although the Actuary says that, actuarially, Trustees need not take into account future service liabilities, I do not accept that this is either a sensible or prudent approach if we wish for the continuation of the Scheme in its present form.
6. At 31 March valuation, the employer’s contribution rate, in respect of future service, was calculated to be 30.5%. The past service surplus, of £563.3m at that time, could reduce this to 12.5% for an indefinite period. The agreed reduction of the employer contribution rate to 10.8% reduced this indefinite period to a period of just under 16 years.
7. At 30 September, the employer’s contribution rate, in respect of future service, was calculated to be 30.1%. The updated, lower, past service surplus, of £322.5m, could reduce this to 19.7% for an indefinite period. Maintaining the employer contribution rate of 10.8% reduced this indefinite period to 8.5 years only.
8. These calculations take no account of any benefit improvements.
9. If an employer’s contribution holiday is taken, and the original proposed benefit improvements introduced, the past service surplus will provide for 3 years employer's contribution holiday then 18 months at a 6% contribution rate. (Any variations to the benefit improvements will change these periods to a small extent).
10. At the end of this period the Actuary sees no likelihood, at the present time, of the employer being required to contribute at anything less than 30.1%, or 31.5% if the proposed benefit improvements are introduced. I do not believe that this contribution rate would be acceptable to any employer, or sustainable over any significant period of time.
11. Legal advice tells us that if NATS does not or could not pay the required contributions, the Trustees may be forced to wind up the NATS Section, in accordance with the provisions of the Statutory Instrument. As it would be the Trustees instigating this, NATS would not be in breach of Clause 3.1 of the Trust of Promise which would thus not give any protection.
12. The above points, plus consideration of the volatility of the financial markets and continuing uncertainty due to world events and economic consequences, together with suggestions by Bacon & Woodrow in their October 'Analysis' that "Trustees should be cautious about 'spending' any surplus shown in the valuation on, for example, contribution reductions or benefit improvements", and difficulties being experienced by other organisations having taken contribution holidays, lead me to the firm conclusion that the last thing we should be accepting is either a contribution holiday or benefit improvements.
At the Pensions Committee meeting on 13 November, the Trade Unions Side chose to ignore the advice given by the member Trustees, in their role as advisors to the Committee, and agreed to an employer’s contribution holiday for NATS, and a revised benefit improvement package."
"I have produced the following fact sheet in order to provide information to NATS members of the CAA Pension Scheme (CAAPS) regarding the current proposals by NATS for an employer’s pension contribution holiday and some benefit improvements. These are to be paid for from the past service surplus, identified by the Scheme’s actuary at his 31 March 2001 valuation updated at 30 September to take account of investment market fluctuations during the intervening period. In view of these proposals the member Trustees of the CAA Pension Scheme are extremely concerned about the security of the future funding of the Pension Scheme, and I believe we have now reached a watershed in the life cycle of the Scheme.
Barry Gibbs (retired members’ Trustee) and myself sent e-mails to members of the Trade Unions Side of the NATS Pensions Committee, prior to its reconvened meeting on 13 November, reiterating our previously expressed views, endorsed by the other member Trustees, strongly advising the TUS against accepting either a contribution holiday or benefit improvements, at this point in time. Our reasons were contained in an earlier fact sheet, distributed to them at the Pensions Committee Meeting held on 19 October, which are highlighted by the following points:
1. The surplus being considered is the past service surplus, which takes no account of future service liabilities.
2. Following previous valuations the past service surplus has been used to meet future service liabilities before the residual (net surplus) has been considered for distribution.
3. Neither the employer nor the TUS has ever before suggested that the gross surplus should be the one open to negotiation, by the Pensions Committee, for distribution.
4. This will be the first time, within my memory, that the gross surplus is insufficient to meet future service liabilities. (Estimated deficit of £275.5m).
5. Although the Actuary says that, actuarially, Trustees need not take into account future service liabilities, I do not accept that this is either a sensible or prudent approach if we wish for the continuation of the Scheme in its present form.
6. At 31 March valuation, the employer’s contribution rate, in respect of future service, was calculated to be 30.5%. The past service surplus, of £563.3m at that time, could reduce this to 12.5% for an indefinite period. The agreed reduction of the employer contribution rate to 10.8% reduced this indefinite period to a period of just under 16 years.
7. At 30 September, the employer’s contribution rate, in respect of future service, was calculated to be 30.1%. The updated, lower, past service surplus, of £322.5m, could reduce this to 19.7% for an indefinite period. Maintaining the employer contribution rate of 10.8% reduced this indefinite period to 8.5 years only.
8. These calculations take no account of any benefit improvements.
9. If an employer’s contribution holiday is taken, and the original proposed benefit improvements introduced, the past service surplus will provide for 3 years employer's contribution holiday then 18 months at a 6% contribution rate. (Any variations to the benefit improvements will change these periods to a small extent).
10. At the end of this period the Actuary sees no likelihood, at the present time, of the employer being required to contribute at anything less than 30.1%, or 31.5% if the proposed benefit improvements are introduced. I do not believe that this contribution rate would be acceptable to any employer, or sustainable over any significant period of time.
11. Legal advice tells us that if NATS does not or could not pay the required contributions, the Trustees may be forced to wind up the NATS Section, in accordance with the provisions of the Statutory Instrument. As it would be the Trustees instigating this, NATS would not be in breach of Clause 3.1 of the Trust of Promise which would thus not give any protection.
12. The above points, plus consideration of the volatility of the financial markets and continuing uncertainty due to world events and economic consequences, together with suggestions by Bacon & Woodrow in their October 'Analysis' that "Trustees should be cautious about 'spending' any surplus shown in the valuation on, for example, contribution reductions or benefit improvements", and difficulties being experienced by other organisations having taken contribution holidays, lead me to the firm conclusion that the last thing we should be accepting is either a contribution holiday or benefit improvements.
At the Pensions Committee meeting on 13 November, the Trade Unions Side chose to ignore the advice given by the member Trustees, in their role as advisors to the Committee, and agreed to an employer’s contribution holiday for NATS, and a revised benefit improvement package."
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From "The Times" today:
"The Chancellor also responded to complaints from employers that the Bank of England’s money creation scheme, known as quantitative easing, was distorting the money markets and leading them to record growing shortfalls in final-salary schemes. He said that the Department for Work and Pensions would consult on allowing employers to smooth their valuation of assets and liabilities."
"The Chancellor also responded to complaints from employers that the Bank of England’s money creation scheme, known as quantitative easing, was distorting the money markets and leading them to record growing shortfalls in final-salary schemes. He said that the Department for Work and Pensions would consult on allowing employers to smooth their valuation of assets and liabilities."
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I wonder if the agreed pensions holiday was from the authors of the Memorandum of Understanding which agreed that after the major changes to the pension criteria of a few years ago there would be no further changes until 2023.
My! how time flies.
My! how time flies.
