Presentation to OPA 12 March 2020

Presentation to the Occupational Pensioners’ Alliance (OPA)
There was a very interesting presentation from the Chair of one of British Airways Pension Scheme membership associations – not dissimilar to HPA (he was not a Scheme Trustee). BA have various pension schemes, two DB type schemes (APS and NAPS) and more recently two newer DC schemes that the vast majority of existing staff now belong to. His focus was on the original scheme known as APS (Airways Pension Scheme) that was established in 1948 very much as a typical state sector DB scheme of the time that benefitted from generous inflation protection. His presentation walked us through its history to date culminating in an extended High/Supreme Court case (2014 to 2019) between the Trustees and the company arguing about the benefits that should continue to be payable. Of note BA were directed by a Court ruling to fund all Trustee costs and indemnities. Both parties have only recently settled with the company having to accept defeat in favour of the Trustees and the membership and particularly their benefits that included RPI inflation protection, or as it will be soon after the latest Government consultation, CPIH based indexing. The Trustee has also been able to take on greater responsibility and independence from the company, with the company still providing a £40m guarantee.

APS has some 16,100 pensioners, 750 deferred members and only some 260 serving staff members left. So the scheme is as mature now as HPS will be not far in the future with all members will be pensioners or deferred. APS has been closed to new members since 1990s but is still open to future accruals for the small number of existing staff. As of April 2019, the scheme is 112% funded which basically means it has more assets than needed to pay out its liabilities and there is no deficit. This is a hugely beneficial position to be in within the current pension climate given that there is only a small percentage of staff now contributing (note employee contributions are 7.25% and employer contributions are 35+%). The investment assets have clearly performed well. This beneficial position gave the Trustee its confidence to take on the company in the legal challenges above.

The presentation slides will be available on the OPA website soon but the key messages taken away were:

•    The workforce have historically benefitted from strong union support which has without doubt influenced the outcome and the final company attitude;
•    The Trust Deed was not as beneficial to the company as the current pension environment norm so the Trustee stood their ground to protect contracted benefits, especially noting the strength of the scheme viability which provided a strong negotiating position for the Trustee;.
•    The situation for APS is generally very different to that for ex HPS and the RAA, which succeeded due to the scheme deficit at the time and acceptance by the Pensions Regulator of the potential imminent insolvency of Halcrow Group Ltd;
•    The APS Trustee Board was evenly distributed between company and member nominated appointments (requiring 2/3 of all Trustee Directors in favour for significant decisions) and the membership should be extremely thankful that the company appointees stood together with the member nominated trustees.