BA end pension
BA end pension
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British Airways Changes Pension Scheme For New Employees
Edited Press Release
LONDON -(Dow Jones)- British Airways (NYSE: BAB - News) is to change the pension provision it makes for future new U.K. employees, moving from a defined benefit final salary basis to a defined contribution basis from autumn 2002.
The decision will not affect the pension benefits of the 65,000 members of NAPS, the New Airways Pension Scheme, or the 36,000 members of APS, the original Airways Pension Scheme, which was available to employees who joined before 1984.
The decision follows a thorough internal review of the company's U.K. pension arrangements taking into account the changing competitive environment, new accounting rules (FRS17), volatile markets and rising life expectancy.
Under FRS17, APS/NAPS taken together generate a company accounting shortfall of GBP394 million as at March 31, 2002 .
APS/NAPS have investments together valued at nearly GBP10 billion. Both schemes meet the statutory Minimum Funding Requirement (MFR).
The FRS17 valuation does not have any impact on cash flow.
These schemes have proven to be inadequate due to low funding levels on the part of the employer. The one at CX for example (B-Scale Provident Fund) has been shown by many actuaries to be under funded, leading to lower than average benefits.
Any idea of the contribution level?
Edited Press Release
LONDON -(Dow Jones)- British Airways (NYSE: BAB - News) is to change the pension provision it makes for future new U.K. employees, moving from a defined benefit final salary basis to a defined contribution basis from autumn 2002.
The decision will not affect the pension benefits of the 65,000 members of NAPS, the New Airways Pension Scheme, or the 36,000 members of APS, the original Airways Pension Scheme, which was available to employees who joined before 1984.
The decision follows a thorough internal review of the company's U.K. pension arrangements taking into account the changing competitive environment, new accounting rules (FRS17), volatile markets and rising life expectancy.
Under FRS17, APS/NAPS taken together generate a company accounting shortfall of GBP394 million as at March 31, 2002 .
APS/NAPS have investments together valued at nearly GBP10 billion. Both schemes meet the statutory Minimum Funding Requirement (MFR).
The FRS17 valuation does not have any impact on cash flow.
These schemes have proven to be inadequate due to low funding levels on the part of the employer. The one at CX for example (B-Scale Provident Fund) has been shown by many actuaries to be under funded, leading to lower than average benefits.
Any idea of the contribution level?
Join Date: May 2001
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so,
no final salary pension,inadequate pay and conditions(well below market rate),no SCOPE agreement as yet,time to command moving further and further away(if you join now,think in terms of 20 years),fleet size and route structure diminishing,etc.etc.etc.
I really cannot see why any young proffessional airline pilot would consider it.
As for potential DEP's...I hear Dubai is nice at this time of year..
jumbodriver
no final salary pension,inadequate pay and conditions(well below market rate),no SCOPE agreement as yet,time to command moving further and further away(if you join now,think in terms of 20 years),fleet size and route structure diminishing,etc.etc.etc.
I really cannot see why any young proffessional airline pilot would consider it.
As for potential DEP's...I hear Dubai is nice at this time of year..
jumbodriver
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If things look so bad to new applicants then people will not join and terms and conditions, pay etc. will have to improve again.
Improvements for BA Pilots are already long over due.......!!!!!
Come on BALPA get those negotiations started again if only for the guys at the bottom of the 3500+ sen. list.
Improvements for BA Pilots are already long over due.......!!!!!
Come on BALPA get those negotiations started again if only for the guys at the bottom of the 3500+ sen. list.
So thats it,
BA have finally shot themselves in the foot big time. The last remaining reason why any DEP would want to join has now been removed. I'm afraid the prospect of sitting in the RHS of a 744/777 for 15 plus years is not the lure that the hierachy of BA obviously thinks it is.
Result? Large increase in the number of cadets to be recruited, (upto the max stipulated by the insurers ), and a surprising lack of DEP's. Eventual protestations by the aforementioned insurers resulting in a long overdue improvement in pay, T and C's and DEP's return, - maybe!!
BA have finally shot themselves in the foot big time. The last remaining reason why any DEP would want to join has now been removed. I'm afraid the prospect of sitting in the RHS of a 744/777 for 15 plus years is not the lure that the hierachy of BA obviously thinks it is.
Result? Large increase in the number of cadets to be recruited, (upto the max stipulated by the insurers ), and a surprising lack of DEP's. Eventual protestations by the aforementioned insurers resulting in a long overdue improvement in pay, T and C's and DEP's return, - maybe!!
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This is really bad news, we at KLMuk have been battling to keep our final salary scheme,( the company wish to close it to new entrants) this has been fought hard as in years to come when the majority are on the money purchase scheme who is to stop the company closing the scheme to current members?
This industry is getting worse and worse, just seems to be a constant battle to protect what we have. Good luck you BA guys hope you will fight this one tooth and nail!
This industry is getting worse and worse, just seems to be a constant battle to protect what we have. Good luck you BA guys hope you will fight this one tooth and nail!
Thread Starter
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BKB
Assume you are referring to the DEP scale? For the TEP the pay goes up just under 4000 pounds between PP1 and 2. But then I guess we have to catch up with your rates! Oh, I nearly forgot about the 15000 grand over 5 years as well....
Assume you are referring to the DEP scale? For the TEP the pay goes up just under 4000 pounds between PP1 and 2. But then I guess we have to catch up with your rates! Oh, I nearly forgot about the 15000 grand over 5 years as well....
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Although BA are closing this scheme for the time being I'm sure that DEP's won't be too much of a problem. In case some of you hadn't noticed there is a huge recession. I like many of my colleagues am about to be made redundant. I have alot of TT and a 744 on my licence to name a few, but in six weeks time I'll work for anyone who can cover my mortgage payments and keep the kids fed.
The difference will come in a few years down the road when with no decent pension to counter the poor salary etc ( and more importantly no bond) people like me will be of to the highest bidder.
rich
The difference will come in a few years down the road when with no decent pension to counter the poor salary etc ( and more importantly no bond) people like me will be of to the highest bidder.
rich
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Perhaps not so bad?
I was under the impresion that a final salary scheme typically limited your pension to 40/60 ths of final salary - reduced further if you worked/contributed less than 40 years. By contrast "money purchase" schemes have an "unlimited" payout if the fund performs well (or a reduced payout if it doesn't).
Historically I thought money purchase schemes were better so I guess that the best type of pension scheme to have would be a 'Money Purchase' type with a 'final salary' guaranted minimum as well.
Historically I thought money purchase schemes were better so I guess that the best type of pension scheme to have would be a 'Money Purchase' type with a 'final salary' guaranted minimum as well.
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Dream on cwatters.
In order to get anything like a decent pension, you need a fund value at retirement of astronomical proportions.
For example, if you were to try and fund a pension now to a value of £20,000 per year (very modest by salary standards), and assuming an annuity rate of 5% (which would be fortunate for a 55 year old), you would need a fund value of £400,000.
Two points emerge from this simple sum;
1. If you have a potential working life of 30 years, you would need to build a fund of in excess of £13000 per year.
2. Now I know that compounding up over 30 years will have a significant effect on the value of the fund, but so does inflation. What is £20,000 going to be worth in 30 years time?
There is much more to this than my over simplified submission here, but you can see from this example, exactly why companies all over are closing final salary schemes. The bottom line is, they simply can't afford them.
The UK government is running scared, because it knows it has a potential time bomb on it's hands. It has struggled to try to move it's responsibilities on to the private sector, and then promptly (via Gordon Brown) dips it's mucky little hands into the funds by way of taxing the dividends that used to be tax free. It then wonders why, financial professionals are not keen on recommending money purchase schemes! The stock markets around the world have been abysmal performers over the past three years or so, and consequently funds have been showing "negative growth". That's a nice way of saying, overpaid fund managers have not been producing the goods.
In around ten years from now, the "baby boomers" (those born just post war) will all retire at once, and then this problem will really come home to roost. You end up with a retired population that cannot be supported by those left in work.
Anyone that has a final salary scheme, HANG ON to it!
In order to get anything like a decent pension, you need a fund value at retirement of astronomical proportions.
For example, if you were to try and fund a pension now to a value of £20,000 per year (very modest by salary standards), and assuming an annuity rate of 5% (which would be fortunate for a 55 year old), you would need a fund value of £400,000.
Two points emerge from this simple sum;
1. If you have a potential working life of 30 years, you would need to build a fund of in excess of £13000 per year.
2. Now I know that compounding up over 30 years will have a significant effect on the value of the fund, but so does inflation. What is £20,000 going to be worth in 30 years time?
There is much more to this than my over simplified submission here, but you can see from this example, exactly why companies all over are closing final salary schemes. The bottom line is, they simply can't afford them.
The UK government is running scared, because it knows it has a potential time bomb on it's hands. It has struggled to try to move it's responsibilities on to the private sector, and then promptly (via Gordon Brown) dips it's mucky little hands into the funds by way of taxing the dividends that used to be tax free. It then wonders why, financial professionals are not keen on recommending money purchase schemes! The stock markets around the world have been abysmal performers over the past three years or so, and consequently funds have been showing "negative growth". That's a nice way of saying, overpaid fund managers have not been producing the goods.
In around ten years from now, the "baby boomers" (those born just post war) will all retire at once, and then this problem will really come home to roost. You end up with a retired population that cannot be supported by those left in work.
Anyone that has a final salary scheme, HANG ON to it!
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This is the thin end of the wedge Ladies and Gentlemen. Take it from one of Mr. Eddington's former employees, it won't stop here. Just because it only affects new hires doesn't mean you shouldn't try and stop it. This is how attacks on the Profession of Pilot are done, bit by bit.
He was at CX for the B-Scale and barely got out of Ansett before the collapse. This man will try and take everything from you, little by little.
These schemes have been proven by reputable actuarial firms to be far less beneficial than the one you currently have. The companies that use them notorioulsy under contribute. What seems like a lot i.e. 15 or 20 percent isn't enough to make up for long dry spells in the markets. How well have your investments done over the last 3 years? Think about that for when you are in your early 50s looking at retirment and a shrinking Pfund.
You have a strong union, use it. Stop this and any future infringements on your livelyhood before it gets out of hand.
He was at CX for the B-Scale and barely got out of Ansett before the collapse. This man will try and take everything from you, little by little.
These schemes have been proven by reputable actuarial firms to be far less beneficial than the one you currently have. The companies that use them notorioulsy under contribute. What seems like a lot i.e. 15 or 20 percent isn't enough to make up for long dry spells in the markets. How well have your investments done over the last 3 years? Think about that for when you are in your early 50s looking at retirment and a shrinking Pfund.
You have a strong union, use it. Stop this and any future infringements on your livelyhood before it gets out of hand.
Last edited by 6feetunder; 10th May 2002 at 20:32.
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There is little that any union can do - it is not open to argument as is shut permanetly. This is an unfortunate circumstance, but one which was fairly predictable in today's financial envionment.
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Totally agree with WhiteSail.
I reckon my final salary scheme is worth the equivalent of £800 per month compared to going to another employer offering a money purchase scheme and a nominal 5% contribution.
In other words a money purchase employer would have to pay me an extra £800 per month just to break-even.
I reckon my final salary scheme is worth the equivalent of £800 per month compared to going to another employer offering a money purchase scheme and a nominal 5% contribution.
In other words a money purchase employer would have to pay me an extra £800 per month just to break-even.
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I pointed this out in early March.
It's a very sad outcome. - Lets hope that applicants (DEP's) realise the kind of crappy deal they are likely to get when applying to BA now.
I can't think of a single reason to join...
It's a very sad outcome. - Lets hope that applicants (DEP's) realise the kind of crappy deal they are likely to get when applying to BA now.
I can't think of a single reason to join...
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Lucifer - Pensions are a major part of any employee's Terms and Conditions and as such are always open to negotiation. If a union just accepts any decision on T&C's by the company, then what's the point in having a union ?
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All the ire at the change in pension strategy by BA should be aimed 100% at incumbent Chancellor. His repeated theft from this country's pension funds and tightening squeeze on taxpayers and pensioners alike to finance this administration's double-speak, broken promises and incompetance cannot be underwritten by the companies without risking even more corporate failures and mass redundancies.
It should be remembered that many more companies than just BA have been and will be forced to abandon final salary schemes by Brown's latest fiscal manoeuvres. Yes the employee ends up suffering (again), but we have already learned that when they say they won't hike tax on income they mean that actually they will.
It should be remembered that many more companies than just BA have been and will be forced to abandon final salary schemes by Brown's latest fiscal manoeuvres. Yes the employee ends up suffering (again), but we have already learned that when they say they won't hike tax on income they mean that actually they will.
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My point was that as it is shut to all in the company full stop, then even unions would be unable to resurrect it since the company would never let one group of employees have it and not all the others. Too much of a loss of face leading to demands from other unions.