Fund Deficit
The annual report for the year ending 31 December 2006 now indicates that the deficit in the scheme has fallen to about £50M. The true deficit will be revealed next year when the three yearly full actuarial review for the year ending 31 Dec '07 will take place.
Last year the Company and the Trade Unions conducted negotiations on proposals to reduce future benefits for current employees and a plan to address this deficit. Such a plan had, by law, to be in place by 31.3.2006. In the event the negotiations took much longer than anticipated and the Company had to agree an interim funding recovery plan with the Trustees in order to satisfy pensions legislation. This plan was introduced in April '06 and under its terms the Company pays an increased contribution rate based on the payroll and additional £1.54M per month for the next 10 years.
The new plan now in place involves: -
- Benefit reductions for current employees.
- Increased employer and employee contributions.
- An immediate cash payment of £30M. from the Company and further annual cash payments of £10M per year for the next 5 years.
The Trustees agreed these proposals because they involve cash payment over a shorter time than the interim plan. The employee members were balloted and of the TU members, 882 voted in favour of the benefits changes and 324 voted against. The non-union members voted 281 for and 173 against.
The interesting statistic is that the TUs now represent only 7% of the 16,325 scheme members and only 72% of the employee members. Why then should they alone have the last word on the funding measures for our Scheme?
BAE Systems has an estimated total deficit for all its pension schemes of over £2 billion.