British (Rentokil) Airways
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But what about BACX.......
As a non-mainline person, but with the purse strings to my Final Salary BACX scheme, (now also closed to new members) now firmly held by BA, what is the opinion of the contributors in terms of 'the big picture'?
Do mainline NAPS people feel there is any useful linkage? Not in actual fiscal scheme blending, but in the domino theory, and therefore the potential for BA to close
or maybe more likely to change the member contributions / scheme benefits to the BACX scheme as a pre-cursor to doing the same to NAPS. Perhaps to try and hugely increase member contributions against a vastly reduced benefits for those who chose not to, (arguably) throw good money after bad. Having said all that, would we rather have an increased cost than no scheme at all?
As people have demonstrated by their contributions on this and other threads, if they're not in a scheme, they are not going to stand up and be counted, far less die in a ditch over it. Just as in mainline, BACX currently has many staff not fortunate enough to be part of a DB scheme. What will be the attitude of mainline when the BACX scheme is seriously threatened? Remember it was ours which was first closed to new members, and also remember it was mainline who closed the Brymon scheme overnight - JUST BECAUSE THEY COULD - back in the early 90's as a cost saver.
I don't want to open the BA / BACX bickering box again, but this really does seem to be an issue where the same principle applies to both of us, and BALPA perhaps could and should remember the old 'United we stand' formula.
Do mainline NAPS people feel there is any useful linkage? Not in actual fiscal scheme blending, but in the domino theory, and therefore the potential for BA to close
or maybe more likely to change the member contributions / scheme benefits to the BACX scheme as a pre-cursor to doing the same to NAPS. Perhaps to try and hugely increase member contributions against a vastly reduced benefits for those who chose not to, (arguably) throw good money after bad. Having said all that, would we rather have an increased cost than no scheme at all?As people have demonstrated by their contributions on this and other threads, if they're not in a scheme, they are not going to stand up and be counted, far less die in a ditch over it. Just as in mainline, BACX currently has many staff not fortunate enough to be part of a DB scheme. What will be the attitude of mainline when the BACX scheme is seriously threatened? Remember it was ours which was first closed to new members, and also remember it was mainline who closed the Brymon scheme overnight - JUST BECAUSE THEY COULD - back in the early 90's as a cost saver.
I don't want to open the BA / BACX bickering box again, but this really does seem to be an issue where the same principle applies to both of us, and BALPA perhaps could and should remember the old 'United we stand' formula.
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Having worked in BACX a few years ago and seen the bickering between mainline and CX company councils and pilots, I reckon in reality there will be no support across the companies.
However, I do feel that it is shameful if there is no support. There is such a misunderstanding between the two companies, as demonstrated by the article and letters in the Log recently.
We are both a group of pilots who are doing our jobs well, its not like BA are amazing and BACX are not, which unfortunatlely is the attitude of a voiciforous few. The ones who do know BACX are a good bunch are too quiet about it, and in reality not many BA pilots understand who or what BACX is. There is still much confusion between City Flyer and CitiExpress. when people ask me my background, they often say they understand and then ask if I was based at LGW on the RJ - wrong company!
Anyhow, I reckon BALPA should be encouraging us to work together and understand each others situations, that is something they are terrible at.
However, I do feel that it is shameful if there is no support. There is such a misunderstanding between the two companies, as demonstrated by the article and letters in the Log recently.
We are both a group of pilots who are doing our jobs well, its not like BA are amazing and BACX are not, which unfortunatlely is the attitude of a voiciforous few. The ones who do know BACX are a good bunch are too quiet about it, and in reality not many BA pilots understand who or what BACX is. There is still much confusion between City Flyer and CitiExpress. when people ask me my background, they often say they understand and then ask if I was based at LGW on the RJ - wrong company!
Anyhow, I reckon BALPA should be encouraging us to work together and understand each others situations, that is something they are terrible at.
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Kurtz
"with the purse strings to my Final Salary BACX scheme, (now also closed to new members) now firmly held by BA"
Not sure that is strictly true.
Feelings in mainline regarding retaining an FSS seem to be running quite high, with the suggestion of industrial action. Difficult to know if this is a realistic threat! I imagine time will tell!
I am interested to know, what kind of 'useful linkage' you, yourself see. Bearing in mind, as you say, there are now mainline pilots without an FSS either!
I have the geatest sympathy with ANYBODY whose T & Cs are under threat. But then as you probably know, there is a sizeable group of BACX flying staff who already KNOW their T & Cs are likely to face a massive attack in the very near future! What is your view of THEIR 'big picture'?
Finally, it may very well be that the days of BA holding the strings of the BACX purse could, in any case, be numbered.
"with the purse strings to my Final Salary BACX scheme, (now also closed to new members) now firmly held by BA"
Not sure that is strictly true.
Feelings in mainline regarding retaining an FSS seem to be running quite high, with the suggestion of industrial action. Difficult to know if this is a realistic threat! I imagine time will tell!
I am interested to know, what kind of 'useful linkage' you, yourself see. Bearing in mind, as you say, there are now mainline pilots without an FSS either!
I have the geatest sympathy with ANYBODY whose T & Cs are under threat. But then as you probably know, there is a sizeable group of BACX flying staff who already KNOW their T & Cs are likely to face a massive attack in the very near future! What is your view of THEIR 'big picture'?
Finally, it may very well be that the days of BA holding the strings of the BACX purse could, in any case, be numbered.
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Tandem,
What I meant was solely referring to the pensions provision. I'm disappointed you seem to have decided to disingenuously twist my comment into what I think was a reference to the mainline RJ pilots (be delighted to have you put me right there
), obviously a very large number of pilots on all fleets have had their lives, Ts and Cs, and everything thrown into turmoil ever since our ownership status changed. It is also misleading to include your comment "there are now mainline pilots without an FSS either!" I'm not at all sure what that is meant to mean other than a statement of the obvious - clearly the aim is to prevent that status being extended to ALL of us!!!!!!
HOWEVER, it is a bit rich, and insulting to suggest that BA do not hold the purse strings to EVERYTHING related to BACX, which of course includes the pension scheme which they closed to new members a short time before doing the same thing to mainline. My implied suggestion was that the two Company Councils should get together, realise that total closure of the BACX scheme is the first step to total closure of NAPS (I'll pause now for the usual suspects to accuse me of being completely wrong), and send a message to Willie that neither scheme is negotiable, and insist on a statement confirming the retention of both. It would be sad if mainline BALPA once again played the "Separate Companies" card, presumably feeling invincible. I doubt if that would result in anything other than greater progress with the good old 'divide and conquer' strategy which works so well for them. Let's be honest, if five years ago, mainline BALPA had been told that the pension scheme would close to new members, the messenger would have been laughed out of court.
As to my view of the 'sizeable group of BACX flying staff who already KNOW their T & Cs are likely to face a massive attack in the very near future!' - again, I presume you refer to the mainline contingent. I feel as sympathetic to their plight being buggered about by management and moved bases etc as I do to the pure BACX guys - except that as we both know, for whatever reasons, history, silver spoons, superior ability - you choose - they have a much more secure postion in the long run, and have made a fortune via the deal negotiated for them. Good for them, maybe not quite so good for the BACX guys without the golden ejector seat.
Finally, although I cannot help but point out that your final paragraph about BA and purse strings contradicts your earlier comment, what exactly do you mean by "the days of BA holding the strings of the BACX purse could, in any case, be numbered" - we have lived with rumours, 'announcements' and scuttlebutt for so long we may as well be guided by your own, 'extensive' experience in the matter.
What I meant was solely referring to the pensions provision. I'm disappointed you seem to have decided to disingenuously twist my comment into what I think was a reference to the mainline RJ pilots (be delighted to have you put me right there
), obviously a very large number of pilots on all fleets have had their lives, Ts and Cs, and everything thrown into turmoil ever since our ownership status changed. It is also misleading to include your comment "there are now mainline pilots without an FSS either!" I'm not at all sure what that is meant to mean other than a statement of the obvious - clearly the aim is to prevent that status being extended to ALL of us!!!!!!HOWEVER, it is a bit rich, and insulting to suggest that BA do not hold the purse strings to EVERYTHING related to BACX, which of course includes the pension scheme which they closed to new members a short time before doing the same thing to mainline. My implied suggestion was that the two Company Councils should get together, realise that total closure of the BACX scheme is the first step to total closure of NAPS (I'll pause now for the usual suspects to accuse me of being completely wrong), and send a message to Willie that neither scheme is negotiable, and insist on a statement confirming the retention of both. It would be sad if mainline BALPA once again played the "Separate Companies" card, presumably feeling invincible. I doubt if that would result in anything other than greater progress with the good old 'divide and conquer' strategy which works so well for them. Let's be honest, if five years ago, mainline BALPA had been told that the pension scheme would close to new members, the messenger would have been laughed out of court.
As to my view of the 'sizeable group of BACX flying staff who already KNOW their T & Cs are likely to face a massive attack in the very near future!' - again, I presume you refer to the mainline contingent. I feel as sympathetic to their plight being buggered about by management and moved bases etc as I do to the pure BACX guys - except that as we both know, for whatever reasons, history, silver spoons, superior ability - you choose - they have a much more secure postion in the long run, and have made a fortune via the deal negotiated for them. Good for them, maybe not quite so good for the BACX guys without the golden ejector seat.
Finally, although I cannot help but point out that your final paragraph about BA and purse strings contradicts your earlier comment, what exactly do you mean by "the days of BA holding the strings of the BACX purse could, in any case, be numbered" - we have lived with rumours, 'announcements' and scuttlebutt for so long we may as well be guided by your own, 'extensive' experience in the matter.
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Kurtz
I don't particularly wish to hijack this thread, or take it off on an unnecessary tangent, so I will keep this very brief, and hopefully allow the discussion to resume it's natural course. (Perhaps a different thread would be more appropriate?)
I would just like to ask 2 questions:
1) What proportion of BACX pilots are currently expecting a FS pension on retirement?
2) Is the BACX scheme part of NAPS (I don't know)
Finally, I am absolutely delighted to 'put you right'. My previous post was not intended to imply any reference WHATSOEVER to "mainline RJ pilots" (Don't be so paranoid!)
I don't particularly wish to hijack this thread, or take it off on an unnecessary tangent, so I will keep this very brief, and hopefully allow the discussion to resume it's natural course. (Perhaps a different thread would be more appropriate?)
I would just like to ask 2 questions:
1) What proportion of BACX pilots are currently expecting a FS pension on retirement?
2) Is the BACX scheme part of NAPS (I don't know)
Finally, I am absolutely delighted to 'put you right'. My previous post was not intended to imply any reference WHATSOEVER to "mainline RJ pilots" (Don't be so paranoid!)
Last edited by Tandemrotor; 2nd Jan 2006 at 06:20.
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Re: British (Rentokil) Airways
The above posts hint at the misundertandings I mentioned above. BALPA should help remove this misunderstanding and work together better. RJ pilots or whatever, BA and BACX are two companies full of professional people doing a good job and we are all the same in essence if not in reward.
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Re: British (Rentokil) Airways
Tandemrotor
There is also a large number of former CX pilots who have moved on to 'pastures new' since the fateful takeover whose future financial security is very much linked to the FSS scheme they used to subscribe to.
There is also a large number of former CX pilots who have moved on to 'pastures new' since the fateful takeover whose future financial security is very much linked to the FSS scheme they used to subscribe to.
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Re: British (Rentokil) Airways
In the spirit of the New Year, I must congratulate TR on editing his posts. I don't know both the answers, although as of only weeks ago, I became one of the pastures new blokes described by revik. The BACX scheme is definitely not part of NAPS, however the precedent lies in the fact that BACX is part of BA, even if not on the same T&Cs. So, whatever precedent is done to BACX stands a good chance of being sequentially done to BA, IF they think they can get away with it. I would guess that given the huge staff turnover at CX, there is about 50% of pilots left in the scheme, but don't forget EVERYONE in the fromer BRAL/Manx was also in the scheme from the admin staff, through engineering to Ops. so it's not just the pilots involved, and maybe CX BALAP should be talking to T&G etc. , although in theory, the principle is what counts, not the numbers involved. Please, from the heart, let's go forward in the New Year together rather than yet more bickering -and yes, I have done my share. However, new job = new start, (just don't expect me to extend this to TDLF).
Happy New Year everyone!!!!!
Happy New Year everyone!!!!!
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Re: British (Rentokil) Airways
Also in the spirit of the New Year (perhaps age is mellowing me!) The reason I asked whether the BACX pension scheme was part of NAPS, (and I suspected it was not) is simply because NAPS faces very specific problems, namely, a monumental deficit!
It may very well be, that it serves the interests of nobody in BACX to have their pension linked in any way with NAPS!
The reason I asked about the proportion of BACX pilots on FSS, is because this MAY have a bearing on what action can realistically be taken, IF any threat is made to those FSS people in BACX.
Just as in BA, the more people join on MPS, the less secure is the FSS for those that currently expect it. Which is exactly why I voted to strike to protect FSS for new joiners!! Sadly many of my colleagues for whatever reason, disagreed with me!
To TLP, well done for voting with your feet! May I wish you a happier time at your new employer.
It may very well be, that it serves the interests of nobody in BACX to have their pension linked in any way with NAPS!
The reason I asked about the proportion of BACX pilots on FSS, is because this MAY have a bearing on what action can realistically be taken, IF any threat is made to those FSS people in BACX.
Just as in BA, the more people join on MPS, the less secure is the FSS for those that currently expect it. Which is exactly why I voted to strike to protect FSS for new joiners!! Sadly many of my colleagues for whatever reason, disagreed with me!
To TLP, well done for voting with your feet! May I wish you a happier time at your new employer.
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Re: British (Rentokil) Airways
I know we have a big deficit as well, though peanuts compared to the NAPS one I believe. However, talking to our BALPA guys, I understand that ourdeficit is proportionately bigger than the NAPS one. I think the figures are about 9 million quid short, with the Company having failed to put in any extra. They have already imposed a contribution increase on us, back in around 97 I think, when we had to increase our subs by 1% to hang onto the same benefits, so I guess more of the same is on the way - that would still be better than no scheme at all. I don't think the two schemes could legally be joined anyway, but the actions taken by management to the one may very well carry over to the other - hence the requirement for a united front.
TLP, hope we continue to hear from you, and good luck with your new job!
Tandem - glad you voted to strike to protect it - if we had done the same when the scheme was closed to new joiners, I am sure we would also still have it around - the stupid thing is that it actually costs more to close a scheme to new joiners than to keep it open, because uyear on year the average member age increases, which means there are less of us and a greater disparity between active contributing members and the lucky pensioners!!
TLP, hope we continue to hear from you, and good luck with your new job!
Tandem - glad you voted to strike to protect it - if we had done the same when the scheme was closed to new joiners, I am sure we would also still have it around - the stupid thing is that it actually costs more to close a scheme to new joiners than to keep it open, because uyear on year the average member age increases, which means there are less of us and a greater disparity between active contributing members and the lucky pensioners!!
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Re: British (Rentokil) Airways
All very interesting, however I think all posts show a remarkable ability to ignore the reality of the situation. The management of BACX are going to put the FS scheme where the monkey put the nuts:
1. Because they have been told to by mainline.
2. Because there will be no industrial action against it when push comes to shove, and they know it.
3. Because the workforce is divided, and probably a majority is not in it anyway.
As far as BA are concerned, they will focus on their own scheme first - as would anyone. However, unfortunately for them, I believe that all the above points apply in exactly the same way, it's only the scale and numbers which are different. Basically, the Final Salary schemes are nearly all dead as dodos, or about to topple into the grave - Rentokil have done no more than point the way. It's nobodies fault but greedy shortsighted Governments and Managements across the UK, to manage to turn the best system in the world into wreckage in less than a decade takes some truly breathtaking ability.
Me - yeah, I wish I'd seen it coming too. The question is what to do - there's no point saving, because the Gov.UK will just tax and inflate anyway, and then bar you from facilities because you've got savings. Property - hmmm, not at the moment in the UK. Abroad - well, maybe, but eventually the same caveat applies. I don't want to hijack a good thread, but what do YOU guys think is a good alternative investment to keep the Poodles in quality kennels for their retirement?
1. Because they have been told to by mainline.
2. Because there will be no industrial action against it when push comes to shove, and they know it.
3. Because the workforce is divided, and probably a majority is not in it anyway.
As far as BA are concerned, they will focus on their own scheme first - as would anyone. However, unfortunately for them, I believe that all the above points apply in exactly the same way, it's only the scale and numbers which are different. Basically, the Final Salary schemes are nearly all dead as dodos, or about to topple into the grave - Rentokil have done no more than point the way. It's nobodies fault but greedy shortsighted Governments and Managements across the UK, to manage to turn the best system in the world into wreckage in less than a decade takes some truly breathtaking ability.
Me - yeah, I wish I'd seen it coming too. The question is what to do - there's no point saving, because the Gov.UK will just tax and inflate anyway, and then bar you from facilities because you've got savings. Property - hmmm, not at the moment in the UK. Abroad - well, maybe, but eventually the same caveat applies. I don't want to hijack a good thread, but what do YOU guys think is a good alternative investment to keep the Poodles in quality kennels for their retirement?
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Re: British (Rentokil) Airways
The poodle must be very good at fortune telling - it looks like the first domino has just been knocked over:
Anger as Co-op closes the door to all on final salary pension schemes
4 Jan 2006
Leaders of the T&G warned that they expect calls for an industrial action ballot over
plans by the Co-op to close the final salary pension. The closure, which was
announced today and affects all the Co-op businesses, was met with "anger and
disappointment" by Ron Webb, T&G national secretary for transport, on behalf of
drivers across the organisation's operations.
"The T&G has around a thousand members in the transport and distribution
operations who will be directly affected by today's news," said Mr. Webb.
"This is not a good way to start 2006. The Co-op can be assured that we do not
accept the closure of the final salary scheme as a foregone conclusion. We see
today's announcement as first step in a consultation process."
The Co-op undertook a review of pension arrangements over a number of months last
year. The proposals from that review were put to all the unions at a meeting in
Manchester today. With effect from April 2006 the final salary schemes will close and
employees will start paying into a 'career average' scheme.
Mr. Webb said many of the T&G's members in the Co-op's transport and distribution
operations were long-standing employees who had built up many years service. Many of
the drivers were in their late forties and early fifties and had, he added, been
looking forward to continuing to build up a decent pension. "The final salary
pension has been a major reason for the drivers staying at the Co-op," he said.
"Whatever the assurances offered, what is being planned from April will seem like
cold comfort today."
The T&G's national committee will be receiving a report on the Co-op's plans in the
next few days. Mr. Webb said he expected a robust response and could not rule out
calls for an industrial action ballot being made. He said the union had suggested a
number of alternatives to complete closure during the review but the two sides could
not reach agreement. Promising a strong response to the proposals, Mr. Webb said
consultation should be meaningful. "Consultation means dialogue, considering
options and finding agreement," he stressed.
AND FURTHERMORE, THIS HELPS EXPLAIN THE PROBLEM:
Mercer says FTSE 350 deficits rise by €26bn
IPE.com 5/Jan/06: UK – The total pension scheme deficit for companies in the UK’s
FTSE 350 index has risen by £18bn (€26bn) to £93bn, according to estimates from
Mercer Human Resource Consulting.
It said deficits rose by 24% in 2005 despite strong equity market performance,
according to research by Mercer Human Resource Consulting. “Projections for 31
December 2005 year-end accounts suggest that deficits increased from £75bn in 2004
to £93bn last year.”
Although pension asset values rose by around £60bn to £422bn, scheme liabilities
grew by a similar amount, which increased the total deficit.
“Favourable investment performance did little to dilute the value of pension scheme
deficits in 2005,” said Mercer partner Tim Keogh.
“Bond markets rose at the same time as equity markets, causing yields to drop and
liabilities to grow. The need to allow for increased longevity has been an additional
headwind.
Mercer calculated the figures on the basis of international accounting standards -
which will be used for UK listed companies for the first time as at 31 December 2005.
The firm added that FTSE 350 companies account for around half of UK occupational
pension schemes in terms of fund assets.
In 2004, FTSE 350 companies made contributions of around £5bn to reduce their
pension scheme deficits. Mercer says anecdotal evidence suggests this figure won’t
be radically higher in 2005.
Said Keogh said: “Our experience suggests that many companies have waited to find
out the cost of their Pension Protection Fund levy and the strength of the new
funding regulations before they revise their contribution plans.
“Despite some companies making substantial contributions in 2005, often to
facilitate a major deal, we have yet to see the radical change in contribution
strategy the Pensions Regulator is probably hoping for.”
So, not much good news there - for "DRIVERS" read "PILOTS", I suspect there is yet more bad news to come our way - and who is going to sympathise? I wonder what the financial KPI bonus is for saving the Company the overheads associated with a Final Salary Scheme?
Oh, and for an Effoh, or junior Captain, just do the sums on a 'career average' scheme and see the difference!!! Bastards!!!
Anger as Co-op closes the door to all on final salary pension schemes
4 Jan 2006
Leaders of the T&G warned that they expect calls for an industrial action ballot over
plans by the Co-op to close the final salary pension. The closure, which was
announced today and affects all the Co-op businesses, was met with "anger and
disappointment" by Ron Webb, T&G national secretary for transport, on behalf of
drivers across the organisation's operations.
"The T&G has around a thousand members in the transport and distribution
operations who will be directly affected by today's news," said Mr. Webb.
"This is not a good way to start 2006. The Co-op can be assured that we do not
accept the closure of the final salary scheme as a foregone conclusion. We see
today's announcement as first step in a consultation process."
The Co-op undertook a review of pension arrangements over a number of months last
year. The proposals from that review were put to all the unions at a meeting in
Manchester today. With effect from April 2006 the final salary schemes will close and
employees will start paying into a 'career average' scheme.
Mr. Webb said many of the T&G's members in the Co-op's transport and distribution
operations were long-standing employees who had built up many years service. Many of
the drivers were in their late forties and early fifties and had, he added, been
looking forward to continuing to build up a decent pension. "The final salary
pension has been a major reason for the drivers staying at the Co-op," he said.
"Whatever the assurances offered, what is being planned from April will seem like
cold comfort today."
The T&G's national committee will be receiving a report on the Co-op's plans in the
next few days. Mr. Webb said he expected a robust response and could not rule out
calls for an industrial action ballot being made. He said the union had suggested a
number of alternatives to complete closure during the review but the two sides could
not reach agreement. Promising a strong response to the proposals, Mr. Webb said
consultation should be meaningful. "Consultation means dialogue, considering
options and finding agreement," he stressed.
AND FURTHERMORE, THIS HELPS EXPLAIN THE PROBLEM:
Mercer says FTSE 350 deficits rise by €26bn
IPE.com 5/Jan/06: UK – The total pension scheme deficit for companies in the UK’s
FTSE 350 index has risen by £18bn (€26bn) to £93bn, according to estimates from
Mercer Human Resource Consulting.
It said deficits rose by 24% in 2005 despite strong equity market performance,
according to research by Mercer Human Resource Consulting. “Projections for 31
December 2005 year-end accounts suggest that deficits increased from £75bn in 2004
to £93bn last year.”
Although pension asset values rose by around £60bn to £422bn, scheme liabilities
grew by a similar amount, which increased the total deficit.
“Favourable investment performance did little to dilute the value of pension scheme
deficits in 2005,” said Mercer partner Tim Keogh.
“Bond markets rose at the same time as equity markets, causing yields to drop and
liabilities to grow. The need to allow for increased longevity has been an additional
headwind.
Mercer calculated the figures on the basis of international accounting standards -
which will be used for UK listed companies for the first time as at 31 December 2005.
The firm added that FTSE 350 companies account for around half of UK occupational
pension schemes in terms of fund assets.
In 2004, FTSE 350 companies made contributions of around £5bn to reduce their
pension scheme deficits. Mercer says anecdotal evidence suggests this figure won’t
be radically higher in 2005.
Said Keogh said: “Our experience suggests that many companies have waited to find
out the cost of their Pension Protection Fund levy and the strength of the new
funding regulations before they revise their contribution plans.
“Despite some companies making substantial contributions in 2005, often to
facilitate a major deal, we have yet to see the radical change in contribution
strategy the Pensions Regulator is probably hoping for.”
So, not much good news there - for "DRIVERS" read "PILOTS", I suspect there is yet more bad news to come our way - and who is going to sympathise? I wonder what the financial KPI bonus is for saving the Company the overheads associated with a Final Salary Scheme?
Oh, and for an Effoh, or junior Captain, just do the sums on a 'career average' scheme and see the difference!!! Bastards!!!
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Re: British (Rentokil) Airways
That all takes some reading, but I'm glad I bothered, even though there is no good news. Once you start looking around the internet, it actually gets a lot worse, this is from MSN Money, as follows:-
The beginning of the end for final salary pensions?
By Nic Cicutti, MSN Money Special Correspondent
Last updated January 5 2006
The long, agonised demise of final salary pensions has moved another step towards reality.
One of the UK’s largest store chains is planning to replace its current pension scheme with another one that will pay its 70,000 workers a lot less money when they retire.
The Co-operative Group, whose staff work in hundreds of stores, banks, funeral homes and distribution centres across the UK, is planning to switch from a proper final salary pension to a career average one.
This means future entitlements to benefits will accrue on the basis of the employee's average salary over their working lifetime.
What is the Co-op doing?
The company insists that the amount it currently contributes towards staff’s pensions remains unchanged. It will still pay employers’ contributions of 16% into the scheme, compared to employees' contributions of 6%. Any rights already accrued under the final salary scheme will be preserved.
However, experts point out that career average schemes generally deliver a pension worth considerably less than a final salary scheme. The value of the annual pension will be at least 10% less, because most staff’s earnings tend to be at their highest at the moment they retire.
Some 22,000 existing members of the final salary schemes will lose out to varying extent. The remaining workforce were not members of the scheme in question but have lost the option to join the final salary schemes in future.
The decision is not yet final. The Co-op is a member-owned body, managed by a board of trustees. Unions, which are strongly represented at the Co-operative Group, have threatened strike action against the proposals. Staff and unions will be consulted before a decision is reached some time before April.
However, the Co-op’s move is only the latest in a long line of company decisions suggesting the death knell may be sounding for final salary schemes.
The demise of final salary schemes?
Some 25,000 staff at Philip Green's fashion group Arcadia, which owns Top Shop, Dorothy Perkins, Wallis and Burton, were told that members of its final salary scheme must increase contributions by half and work five years longer to qualify for the same payout
Arcadia plans to alter its final salary scheme, with employees being asked to contribute 6% rather than the previous 4% of salary into the fund. Staff have already been told that their retirement age will be moved from 60 to 65.
Philip Green, Arcadia's owner, whose family collected dividends totalling £1.2 billion last year, says increasing contributions means the average annual staff pension will increase from £8,100 to £9,800.
Caught in a rat-trap
Meanwhile, the security-to-hygiene firm Rentokil announced plans just before Christmas to close its final salary pension scheme to existing staff.
Guaranteed benefits will remain at current levels, no matter how long members stay with the company.
Rentokil adds that it will consult workers before proceeding with the plan and will offer staff an alternative pension scheme.
The firm says its plans, the first such move by a FTSE 100 company, are aimed at tackling rising pension costs. Rentokil has a £325 million pension fund deficit, partly caused by its pensions holiday between October 1999 and March 2003, when it made no contributions at all into its scheme.
For an excellent analysis of the Rentokil pensions debacle, look no further than a brilliant piece by my MSN Money fellow-columnist Nick Louth
More general attacks to final salary schemes
According to the National Association of Pension Funds, the umbrella body whose members include millions of workers, almost 60% of existing schemes no longer offer final salary options to new joiners.
Some 24% more estimate that they will go down the same path in the next five years.
Read more abut the report here (opens in new window)
Punter Southall, the pensions consultancy firm, estimates that the 10 FTSE 100 companies with the largest pensions deficits have a combined shortfall totalling more than £25 billion.
With the Pensions Regulator wanting companies to fund these deficits before 2015, it is seemingly inevitable that more businesses will close their final salary schemes to existing members.
Why final salary schemes are under threat
Everyone is looking for someone to blame for the demise of occupational schemes.
The truth is that there are a number of issues impacting on the cost of pension schemes. Here they are, in no particular order:
Longevity is rising: The average scheme member retiring today will live longer than actuarially assumed. Pension schemes are therefore having to pay pensions for longer than anticipated. The increased number of pensioners living longer raises the age profile of the scheme which, in turn, increases the ongoing funding levels.
Interest rates have fallen: As well as having to pay pensions for longer, the current climate of low interest rates adds to the expense of purchasing an annuity. Pension funds are having to set aside larger sums to pay income than they needed to a few years ago. In fact, since the early 1990s, annuity rates have fallen by approximately 50%, with this trend likely to continue in the near future.
Equity investments have fallen: The majority of pension funds have a sizeable portion of their funds invested in equities, which have fallen over the past five years, although they are ahead over longer periods of 10 years or more.
Inland Revenue tax raids: The taxman decided to tax any surplus above 105% funding, so there was no incentive to let the surpluses build up. Also, the removal of advance corporation tax (ACT) relief, costing funds £5 billion a year.
Pensions holidays: Employers used pension funds to hide the costs of industrial restructuring and took contribution holidays, instead of building up surpluses in the good times.
Government costs: Successive governments heaped huge extra costs on schemes over the years, including index-linking, which cost funds an extra 20%; spouse’s pensions, which added another 20%; the right to early retirement in some instances; plus costs of compliance and meeting new accounting standards, which require companies to identify and fund shortfalls within a specified time period.
What to do if your scheme is under threat of closure
If you are a member, contact your union for advice and representation. Unions have been successful in maintaining retirement benefits for many of their members.
If you are not a member of a trade union, ask your employer if they offer access to any other type of pension scheme, such as:
A money purchase (or defined contribution) occupational pension scheme
A group personal pension plan (GPPP)
A stakeholder pension
If your only option is to join a money purchase scheme, it is worth doing so, as your employer will contribute. Work out how much this will be and how much it will cost to replace the benefits you would have received as part of your final salary scheme, such as life cover.
Compare this with how much you think you will need to live on in retirement. You will have to make up the shortfall, which may be possible through additional contributions to your employer's money purchase scheme.
Alternatively, your company may have an additional voluntary contribution (AVC) scheme that you can put money into. Or you could opt for a stakeholder-style plan: if you earn less than £30,000, you can invest in a stakeholder alongside your money purchase scheme.
The beginning of the end for final salary pensions?
By Nic Cicutti, MSN Money Special Correspondent
Last updated January 5 2006
The long, agonised demise of final salary pensions has moved another step towards reality.
One of the UK’s largest store chains is planning to replace its current pension scheme with another one that will pay its 70,000 workers a lot less money when they retire.
The Co-operative Group, whose staff work in hundreds of stores, banks, funeral homes and distribution centres across the UK, is planning to switch from a proper final salary pension to a career average one.
This means future entitlements to benefits will accrue on the basis of the employee's average salary over their working lifetime.
What is the Co-op doing?
The company insists that the amount it currently contributes towards staff’s pensions remains unchanged. It will still pay employers’ contributions of 16% into the scheme, compared to employees' contributions of 6%. Any rights already accrued under the final salary scheme will be preserved.
However, experts point out that career average schemes generally deliver a pension worth considerably less than a final salary scheme. The value of the annual pension will be at least 10% less, because most staff’s earnings tend to be at their highest at the moment they retire.
Some 22,000 existing members of the final salary schemes will lose out to varying extent. The remaining workforce were not members of the scheme in question but have lost the option to join the final salary schemes in future.
The decision is not yet final. The Co-op is a member-owned body, managed by a board of trustees. Unions, which are strongly represented at the Co-operative Group, have threatened strike action against the proposals. Staff and unions will be consulted before a decision is reached some time before April.
However, the Co-op’s move is only the latest in a long line of company decisions suggesting the death knell may be sounding for final salary schemes.
The demise of final salary schemes?
Some 25,000 staff at Philip Green's fashion group Arcadia, which owns Top Shop, Dorothy Perkins, Wallis and Burton, were told that members of its final salary scheme must increase contributions by half and work five years longer to qualify for the same payout
Arcadia plans to alter its final salary scheme, with employees being asked to contribute 6% rather than the previous 4% of salary into the fund. Staff have already been told that their retirement age will be moved from 60 to 65.
Philip Green, Arcadia's owner, whose family collected dividends totalling £1.2 billion last year, says increasing contributions means the average annual staff pension will increase from £8,100 to £9,800.
Caught in a rat-trap
Meanwhile, the security-to-hygiene firm Rentokil announced plans just before Christmas to close its final salary pension scheme to existing staff.
Guaranteed benefits will remain at current levels, no matter how long members stay with the company.
Rentokil adds that it will consult workers before proceeding with the plan and will offer staff an alternative pension scheme.
The firm says its plans, the first such move by a FTSE 100 company, are aimed at tackling rising pension costs. Rentokil has a £325 million pension fund deficit, partly caused by its pensions holiday between October 1999 and March 2003, when it made no contributions at all into its scheme.
For an excellent analysis of the Rentokil pensions debacle, look no further than a brilliant piece by my MSN Money fellow-columnist Nick Louth
More general attacks to final salary schemes
According to the National Association of Pension Funds, the umbrella body whose members include millions of workers, almost 60% of existing schemes no longer offer final salary options to new joiners.
Some 24% more estimate that they will go down the same path in the next five years.
Read more abut the report here (opens in new window)
Punter Southall, the pensions consultancy firm, estimates that the 10 FTSE 100 companies with the largest pensions deficits have a combined shortfall totalling more than £25 billion.
With the Pensions Regulator wanting companies to fund these deficits before 2015, it is seemingly inevitable that more businesses will close their final salary schemes to existing members.
Why final salary schemes are under threat
Everyone is looking for someone to blame for the demise of occupational schemes.
The truth is that there are a number of issues impacting on the cost of pension schemes. Here they are, in no particular order:
Longevity is rising: The average scheme member retiring today will live longer than actuarially assumed. Pension schemes are therefore having to pay pensions for longer than anticipated. The increased number of pensioners living longer raises the age profile of the scheme which, in turn, increases the ongoing funding levels.
Interest rates have fallen: As well as having to pay pensions for longer, the current climate of low interest rates adds to the expense of purchasing an annuity. Pension funds are having to set aside larger sums to pay income than they needed to a few years ago. In fact, since the early 1990s, annuity rates have fallen by approximately 50%, with this trend likely to continue in the near future.
Equity investments have fallen: The majority of pension funds have a sizeable portion of their funds invested in equities, which have fallen over the past five years, although they are ahead over longer periods of 10 years or more.
Inland Revenue tax raids: The taxman decided to tax any surplus above 105% funding, so there was no incentive to let the surpluses build up. Also, the removal of advance corporation tax (ACT) relief, costing funds £5 billion a year.
Pensions holidays: Employers used pension funds to hide the costs of industrial restructuring and took contribution holidays, instead of building up surpluses in the good times.
Government costs: Successive governments heaped huge extra costs on schemes over the years, including index-linking, which cost funds an extra 20%; spouse’s pensions, which added another 20%; the right to early retirement in some instances; plus costs of compliance and meeting new accounting standards, which require companies to identify and fund shortfalls within a specified time period.
What to do if your scheme is under threat of closure
If you are a member, contact your union for advice and representation. Unions have been successful in maintaining retirement benefits for many of their members.
If you are not a member of a trade union, ask your employer if they offer access to any other type of pension scheme, such as:
A money purchase (or defined contribution) occupational pension scheme
A group personal pension plan (GPPP)
A stakeholder pension
If your only option is to join a money purchase scheme, it is worth doing so, as your employer will contribute. Work out how much this will be and how much it will cost to replace the benefits you would have received as part of your final salary scheme, such as life cover.
Compare this with how much you think you will need to live on in retirement. You will have to make up the shortfall, which may be possible through additional contributions to your employer's money purchase scheme.
Alternatively, your company may have an additional voluntary contribution (AVC) scheme that you can put money into. Or you could opt for a stakeholder-style plan: if you earn less than £30,000, you can invest in a stakeholder alongside your money purchase scheme.
