The above bar chart illustrates how the RO Pension Fund has performed between 1985 and 2006.
(If viewing in Internet Explorer the actual values at the year end and significant events during this period may be revealed by hovering the cursor over each of the bars. Alternatively, if your browser fails to show these, refer to the supplementary text below.)
During the "fat" years when the fund has been in surplus, the sponsoring company, BAE Systems, has utilised a total of £215M for its own purposes. (See Surplus.) In contrast it has since contributed a total of £114M to the fund since it gained control of Royal Ordnance for £190M in 1987.
Following the stock market crash the fund went into deficit by about £123M but is now slowly beginning to climb back up. According to the annual report for 2003 the scheme was "99.3% funded on an ongoing basis". However two members of the Institute of Actuaries warned that such statements by scheme actuaries are highly misleading. The official guidance notes allow actuaries to claim that full transfer values are being paid when these transfer values would not secure even 50 per cent of the benefits if the scheme were to be wound up.
BAE's Pensions Update first acknowledged the existence of a deficit in December 2005. Despite the recent increases in the value of the fund the FRS17 deficit at the end of 2005 stands at £178M.
Note: The average pension in payment for ROPS is about £3440 pa which should be compared with the average across all defined benefit pension schemes of about £4400.
Fund Values at Year End and Significant Events
1985: £174M. Fund established on 2 January, 1985 (Equivalent to about £400M at 2004 prices.)
1986: £216M.
1987: £233M. BAe take control of RO.
1988: £281M.
1989: £368M. Surplus: £142.4M (£80M carried forward) Company pension holiday commenced
1990: £333M.
1991: £366M. Crown Service and 1984 Schemes merged
1992: £424M. Surplus 92.7 (17.0 carried forward). Company pension holiday continues.
1993: £525M.
1994: £477M. Employees pension holiday begins. Some employer contributions to cover early retirement
1995: £587M. Surplus: £84M (£24M carried forward). BMARC joined
1996: £624M. £33.9M transferred in from BMARC
1997: £686M. The Chancellor removes tax dividend relief from pension funds.
1998: £751M. Government cuts MFR by up to 19%. "Surplus": £32M (£15M carried forward)
1999: £890M. ROPA recommend BAE Systems become principal employer and decrease holding in equities and increase bonds
2000: £845M. Scheme closed. BAE Systems becomes principal employer
2001: £735M. Fund now with small deficit. Boots move their fund entirely into bonds
2002: £627M. Government cuts MFR by a further 8% so that it now covers only about 50% of the liabilities. Stock market continues to fall.
2003: £694M. Market recovery begins.
2004: £746M. Fund returns almost to 1998 value.
2005: £855M. Recovery continues. FRS17 deficit: £178M
2006: £933M. 10y recovery plan starts. £30M injection and increased contributions.