British airways pension to close.
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Pensions are a relatively new phenomena. It is only 100 years or so that most western countries had them. Life expectancy ensured that any obligation on the state or society was short lived...
Roll forward to today.
A whole industry has grown up with the glory years of retirement. financial planners, travel and tour companies even the funds that hold these accounts.
BA was no different, the government pension liability successfully shifted to Private sector dupes in 1986 when privatised.
With life expectancy well into late 70's and 80's in most western countries, 40 years of work was supposed to cover 40 years of retirement (give or take)
When these idiot central banks suppressed real interest rates, they blew out of the water every asset accumulation model that pension funds and insurance companies rely upon. Instead of rewarding the prudent, they rewarded the debt holders to fund the ongoing debt
show. Insurance companies and pension funds need 6.5% to 7% to cover expected payouts. Financial planners sold the same crap to baby boomers building their retirement models, taking the fees up front for their crap 'service'
Defined benefit pensions are no different.
With the baby boomers exiting all industries at an increasing rate, ultimately we will reach the point where what can't be paid won't be paid...
Roll forward to today.
A whole industry has grown up with the glory years of retirement. financial planners, travel and tour companies even the funds that hold these accounts.
BA was no different, the government pension liability successfully shifted to Private sector dupes in 1986 when privatised.
With life expectancy well into late 70's and 80's in most western countries, 40 years of work was supposed to cover 40 years of retirement (give or take)
When these idiot central banks suppressed real interest rates, they blew out of the water every asset accumulation model that pension funds and insurance companies rely upon. Instead of rewarding the prudent, they rewarded the debt holders to fund the ongoing debt
show. Insurance companies and pension funds need 6.5% to 7% to cover expected payouts. Financial planners sold the same crap to baby boomers building their retirement models, taking the fees up front for their crap 'service'Defined benefit pensions are no different.
With the baby boomers exiting all industries at an increasing rate, ultimately we will reach the point where what can't be paid won't be paid...
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Probably correct Rated De. Which is why those with some sense may be looking to take their DB money out while bond values remain low and those younger pilots being moved out of the BA DB scheme may, a long time in the future, thank their lucky stars.
At least with a DC scheme you know what you have. (at the time of valuation, anyway)
At least with a DC scheme you know what you have. (at the time of valuation, anyway)
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The DC has some positives and is just a savings policy over the long run. Like all investments there are risks to the capital but a diverse portfolio and balancing should mean a positive result in the medium to long term. Equities have out performed historical performance by a big margin over the last 5-8 years. Between 1900 to the crash of 2008 the mean return on equities is approximately inflation plus 4%. The responsibility to financially plan lies with us. Paying the minimum is not an option and in reality we should be looking to pay in a combined contribution of between 25-30% of our salary. Yes it's a lot but if I say 14% from us and 16% from the company it's not so bad. Even with a low return and taking the full lump sum it should deliver a reasonable pension with a retirement at 60 having paid in for 30 years. I look at it like this. The better half is good at spending but less so at saving. She often says that it never seems like I really earn more as my salary improves but what she does not realise is that each time it does i up my contributions. Best case I good pension, worst case I don't get to enjoy my pension but know that the DC pot built up will look after my family. My parent have a great pension but their retirement is not how they envisaged it. Career professionals in medicine and their regret now is working to hard for too long which robbed them of the retirement they can fund but are unable to live. Not sure they would take it so well if a jacked in BA to fly float planes in the Maldives but you get the jist.
Well I have been paying in between 15% and 20% of my salary since I was 18.
And yet I am now going to lose about 30% of my annual pension. Should I have been paying more? Less? Go and enjoy the moment instead of saving for the future?
Gutted! Absolutely gutted!
And yet I am now going to lose about 30% of my annual pension. Should I have been paying more? Less? Go and enjoy the moment instead of saving for the future?
Gutted! Absolutely gutted!
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Like all investments there are risks to the capital but a diverse portfolio and balancing should mean a positive result in the medium to long term. Equities have out performed historical performance by a big margin over the last 5-8 years. Between 1900 to the crash of 2008 the mean return on equities is approximately inflation plus 4%.
Fundamentally using historical data upon which to model returns into the future with the distortions present is not for the weak of stomach. Sometimes return of capital more important than return on capital. Counter party risk in my mind is to be avoided.
Do realise is no consolation, but the whole western world is in the same boat.
Bill Gross has been warning of the unintended consequences of low interest rates for years:
Fund managers that have been counting on returns of 7 percent to 8 percent may need to adjust that to around 4 percent, Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, said during an Aug. 5 interview on Bloomberg TV. Public pensions, including the California Public Employees’ Retirement System, the largest in the U.S., are reporting gains of less than 1 percent for the fiscal year ended June 30.
With baby boomers heading for the exits, there are serious shortfalls in funding all across the globe. Funding short falls of all sorts of retirement models is to become something we all will be familiar with into the future.
On the good news front, rest assured the elected 'representatives' will be made whole and continue to tell you all is well, until it isn't.
Last edited by Rated De; 20th Nov 2017 at 09:57.
Looking at the latest Pension Statement, the average return over the last ten years is over 7%. Last year it was 21% for some of the AVC funds!
It doesn't seem to be the investment returns that are the problem. It is the basis for calculation of liabilities within the scheme that are causing the problem.
Assuming an average life expectancy of 91 is the biggest lie going.
It doesn't seem to be the investment returns that are the problem. It is the basis for calculation of liabilities within the scheme that are causing the problem.
Assuming an average life expectancy of 91 is the biggest lie going.
trouble is that in the UK we are so meek that managements and governments think they can get away with anything. I know things are changing a bit on the other side of the Channel where the 'Aux armes citoyans' attitude does remind politicians and big business that they could end up under the guillotine albeit in more modern form. I think the way people today are treated about pensions is disgraceful.
Another example of how we are slitting into a society of lots of poor people and a few rich ones with nothing in the middle.
Another example of how we are slitting into a society of lots of poor people and a few rich ones with nothing in the middle.
As I was told about it, the original BA APS scheme was set up as an ideal model scheme by the postwar Labour government for what was effectively a new nationalised industry (BEA/BOAC/BSAA). It was to be properly funded from relatively high contributions from both employees and employer, but not like Civil Service etc which are paid directly by the taxpayer. This had the big advantage that for many years there was a lot going in but with few pensioners so very little going out, which was what built the pot up. Pilot retirement age thinking was based on the military experience and was set at mandatory 55 but an optional 50.
The creation of NAPS did not transfer government liability as such, but really recognised that the generous levels in that ideal APS scheme created for a new postwar nationalised industry in the late 1940s couldn't in fact be sustained with ownership by private shareholders, especially after seeing what effect inflation could have in the early 70s. As a scheme that's been closed for decades, I think APS is in fact is in a healthy position thanks to the efforts of the members elected trustees in BAPS etc. But that doesn't do anything to address the situation of todays' generation who have been seriously screwed over by successive rounds of government and management decisions.
Can't give you chapter and verse I'm afraid but that has been my understanding anyway.
I can fully understand why so many people feel cheated. I worry about the situation of my own children who are now in their 40s with very little short term job security or loyalty from employers, and little long term financial security.
One other side comment: to some extent these things reflect trade-offs. Prior to BA privatisation, I attended a number of IFALPA conferences where we were obviously mixing with senior pilots from other countries, and discussed pay and conditions. Because of being government owned and subject to prices and pay policies set by politicians, the Brits were pretty much the poor relations in terms of salaries especially compared to the equivalent US pilots, not to mention Air France, Lufthansa and some others.
Since we weren't allowed to have high salaries "the system" somehow found compensations, such as better working conditions and a much better pension scheme, though I didn't appreciate it at the time. I do know that my standard of living today is higher than some of my US friends who had much more money back in those days. But I do realise that was just our good fortune, not anything we can take credit for.
I can fully understand why so many people feel cheated. I worry about the situation of my own children who are now in their 40s with very little short term job security or loyalty from employers, and little long term financial security.
One other side comment: to some extent these things reflect trade-offs. Prior to BA privatisation, I attended a number of IFALPA conferences where we were obviously mixing with senior pilots from other countries, and discussed pay and conditions. Because of being government owned and subject to prices and pay policies set by politicians, the Brits were pretty much the poor relations in terms of salaries especially compared to the equivalent US pilots, not to mention Air France, Lufthansa and some others.
Since we weren't allowed to have high salaries "the system" somehow found compensations, such as better working conditions and a much better pension scheme, though I didn't appreciate it at the time. I do know that my standard of living today is higher than some of my US friends who had much more money back in those days. But I do realise that was just our good fortune, not anything we can take credit for.
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Being born into a generation who had parents witness the two world wars and a depression with the social dislocation and destruction does help. People collectively were weary, they wanted an inclusive society, neighbourly a bit honourable and dare I say it, courteous. Cycles repeat.
To my mind we are approaching a correction of a magnitude that may dwarf the Great depression and sadly these cycles tend to repeat every four generations: People always repeat the same errors!
The feedback loop of consistent downward pressure on terms on conditions has an economic impact: globalisation left behind the worker.
Business now scratches its head as they have less demand for their product. Missing in their navel gazing is something Henry Ford summarised over 100 years ago (am paraphrasing)
'Unless I pay my workers enough to buy my cars, eventually I have no company.'
Effectively my income is someone else's spending, my spending someone else's income. Unless there is a new planet with opportunities for new markets, we ought realise the circularity of a society that generates an economy.Modern MBA and business management reduced everything to a unit of consumption or unit of cost. Economies and societies are not the same thing.
To my mind we are approaching a correction of a magnitude that may dwarf the Great depression and sadly these cycles tend to repeat every four generations: People always repeat the same errors!
The feedback loop of consistent downward pressure on terms on conditions has an economic impact: globalisation left behind the worker.
Business now scratches its head as they have less demand for their product. Missing in their navel gazing is something Henry Ford summarised over 100 years ago (am paraphrasing)
'Unless I pay my workers enough to buy my cars, eventually I have no company.'
Effectively my income is someone else's spending, my spending someone else's income. Unless there is a new planet with opportunities for new markets, we ought realise the circularity of a society that generates an economy.Modern MBA and business management reduced everything to a unit of consumption or unit of cost. Economies and societies are not the same thing.
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That is because they have been bought off with a nice little tax avoidance scheme for those up against the LTA and or with annual pension allowance tapering. This scheme is a big improvement for many and a huge loss for the rest.
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For what it's worth as a BARP co-pilot I don't have any major problem with this new offer. +3% on my pension contributions from the company (bear in mind we weren't expecting to get anything at all a year ago). But then again I'm a realist and I wasn't expecting much to be honest.
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Is that really what you think? Before we hear whether this is recommended or not? Before we have a ballot? Talk about pre-judging... Unless you were in the room or the meetings, you probably have no idea what BALPA have or have not done.
