British Airways (Pensions Uprating) — House of Commons, 2015-09-14
Topic: Labor
Katherine Anne Green (Labour, Centre-left): It is for Government—I am talking about any Government as this is not a party political matter—to honour commitments to these pensioners, and I will outline their obligations in this regard In relation to index linking, let me quote from the newsletter of January 1984. It says that the new scheme NAPS "will be index linked in line with the cost of living index, up to a maximum of 5% in any one year. But it will not offer unlimited ‘inflation proofing’ like the present scheme"— which is APS "If the rise in the cost of living index is below 5%, the pension will be raised by the actual amount, as it is under the existing scheme." Clearly, there is no specific reference there to which cost of living index was meant. But ABAP argues that it must have meant the retail prices index because the consumer prices index was not then in existence. Up to that point, it had indeed been the practice of the trustees to increase pensions in line with the annual review orders, which had adopted the RPI In any event, NAPS was set up, with approximately half of existing APS pensioners electing to move to the new scheme and the rest remaining in the APS. This must have disappointed BA, because Marshall openly acknowledged the existing scheme was an expensive one for the employer, though he also stated quite categorically that there would be no pressure on existing pensioners to move to the new scheme In 1996, a new attempt was made by BA to persuade APS members to transfer to NAPS. Interestingly, pensioners were told that their pension increase would be "broadly in line with RPI." Then, in 1999 and 2000, attempts were made to merge the schemes, but that was overwhelmingly opposed by members, and the initial decision to do so was reversed by the trustees Meanwhile, a number of other changes to the trust deed governing the APS did take place, the most important being to replace so-called rule 13A with rule 34 in February 1986. This change, which was taken by an inquorate meeting of the trustees, dealt with the ability of trustees under rule 13A to pay augmented pensions, provided that BA gave the trustees the necessary funding to do so within four weeks Rule 34, which later became clause 24, did away with the requirement for BA to fund such increases if in effect the actuary agreed the fund was in surplus. Apparently, the reason was to bring APS in line with NAPS. Despite the fact that this decision was taken at a meeting of the trustees that was not quorate, the company used the power obtained at that meeting to order a further £330 million to be paid from the emerging surplus without being required to provide the funding. As a result, BA enjoyed a substantial contribution holiday from 1999 to 2003 The pattern of poor governance—between 1986 and 1990 at least 11 trust deed and rule amendments were made without a quorum of trustees being present according to ABAP, and the chair of trustees was frequently absent—is the backdrop to the situation in summer 2010 when we come to the emergency Budget. Following the Chancellor’s decision to increase state benefits in line with CPI rather than RPI, the trustees announced that they too would abandon RPI as the index by which pensions were uprated and switch to the CPI. In its results statement on 25 Feb 2011, BA acknowledged that there would be a long-term gap of 0.5% between the two indices, amounting to £770 million. The benefit of this saving would accrue to BA’s Spanish shareholders.