PENSIONS UPDATE ...
The latest from Trustee Captain Mike Post:-
Dear All The news that the NAPS Trustee had reached an agreement with BA on the delayed result of the NAPS 2018 Triennial Valuation was announced yesterday. See: https://www.mybapension.com/naps/news/other-news and below. Curiously BA’s one-off contingency payment of £250 million to NAPS rather than APS is included in the agreement between BA and the NAPS Trustee but it is my understanding that the payment of this money to NAPS is contingent on the judge in the High Court “blessing” the proposed Discretionary Increase settlement agreement between BA and the APS Trustee. That Discretionary Increase blessing hearing is now expected to start on Thursday 31 October 2019. So the Trustee update to NAPS members appears to be anticipating that the APS Discretionary Increase settlement will in fact receive the Court’s blessing. Regards to All Mike Post From the Other News section of the NAPS section of the My BA Pension website: Trustee update to NAPS members - 31 March 2018 funding valuation We are pleased to be able to tell you that we have reached an agreement with British Airways (BA) on the 31 March 2018 funding valuation, which has been submitted to The Pensions Regulator. IAG today made a regulatory news announcement on the agreement, which can be viewed on the IAG website. Funding valuations must be carried out at least every three years and the previous valuation was as at 31 March 2015. The key conclusions from the 2018 valuation are: Funding · ¨ The Scheme’s assets have increased to £16.93 billion (2015: £13.28 billion). · ¨ The Scheme’s liabilities (the pension benefits the Scheme expects to pay out over time) have increased to £19.33 billion (2015: £16.07 billion). · ¨ The Scheme’s funding deficit is £2.4 billion (2015: £2.8 billion). · ¨ The funding level has improved since the last formal valuation to 87.3% (2015: 82.7%). Contributions We have also agreed a new recovery plan with BA. Under the new recovery plan: · ¨ BA will increase its fixed deficit contributions to £450 million a year from April 2020 until March 2023. · ¨ BA will make an additional one-off contingency payment of £250 million to NAPS. This relates to a contingent payment mechanism agreed with Airways Pension Scheme (APS) and NAPS in 2010. As part of the settlement in April 2019 between BA and APS (which is currently awaiting court approval), the payment of these funds will be made to NAPS. · ¨ An overpayment protection mechanism has also been agreed under which BA’s deficit contributions would be suspended, if the funding deficit is cleared, and diverted to escrow if the funding level reaches 97% or higher. Should a deficit re-emerge then contributions would restart, along with catch-up payments for any missed contributions. · ¨ This replaces the existing recovery plan under which BA was due to pay £300 million a year until March 2027, with further payments of up to £150 million each year depending on various financial circumstances. Other Matters BA dividend payments BA has increased its flexibility to make dividend payments to IAG in return for an agreed mechanism to either accelerate contributions or provide a guarantee. For the next three years, if BA pays a dividend to IAG higher than 50% of its pre-exceptional profit after tax (PAT), it will either provide the Scheme with a guarantee for 100% of the dividend amount above 50% of PAT, or 50% of that amount as an additional cash contribution (subject to the conditions under the overpayment protection mechanism above). These payments would automatically count as a pre-payment of the fixed deficit contributions which would otherwise be due at the end of the recovery plan. Reducing NAPS investment risks (“de-risking”) The agreement is based on an assumed de-risking path, with three percent of the Scheme’s assets being switched each year from return seeking assets (such as equities) to liability matching assets (such as bonds). If funding progress is better than expected, half of this excess performance will be used to reduce the Scheme’s deficit and the other half used to reduce volatility by accelerating de- risking. Next steps The Trustee is now working to finalise the actuarial report and we will publish this on our website www.mybapension.comonce complete. In the meantime, we hope this update gives you a helpful overview of the agreement.
....and the result of that hearing:-
Dear All
In the event, the blessing hearing for the proposed settlement of the Discretionary Increase case lasted two whole days and finished yesterday afternoon 1st November. An hour of the first day and all of the second day were heard in private between the lawyers for the APS Trustee and the lawyers for Mark Fielder, the APS Representative Beneficiary. Mark is also now Chairman of ABAP.
I attended the first day’s public session until we, along with BA’s representatives, were asked to leave. Also present were five of the six elected Trustee Directors and Roger Maynard, the BA-appointed Chair of the APS Trustee Board, and Captain Michael Palmer who you will remember chaired the 2011 Ascot Meetings.
Apart for one error, there is a good description of the first day of the public session on the Professional Pensions website at: https://www.professionalpensions.com/news/4006485/awaits-court-blessing-settlement-dispute
The mistake in the Professional Pensions report is that the agreed planned return to RPI increases is in 2021, not 2027 as reported.
If we assume that, subject to the Judge’s approval, the settlement goes through, I understand that in order for BA Pensions to be physically able to include the proposed back payments in the December pension payments, it is desirable that the judgment is handed down as quickly as possible. The Judge will be certain to want to get his judgment right rather than to deliver it speedily. So please don’t anticipate anything until you hear from BA Pensions about the timing of any back payments.
One very interesting point was when BA’s QC, Michael Tennet, said that resignations of both member- and employer-nominated trustees, town-halls organised by scheme members, and tension over the scheme's investment and de-risking strategy had led to paralysis and a drain on scheme resources. By town-halls Michael Tennet meant our Ascot meetings in 2011 and 2012. Of course I knew that three member-nominated trustees had resigned - the late Cliff Pocock, Graham Tomlin and myself. But I was unaware before Michael Tennet announced it in court that BA-appointed trustees had resigned as well. So once again, many thanks for all the continued support. The return to RPI increases wouldn’t have happened without pressure from the members.
Regards to All
Mike Post