The most recent of three trustees to resign from a British Airways pension scheme board has told Pension Funds Insider that the reduced board might be incapable of carrying through the sponsors' hope of switching pension increases to the Consumer Price Index of inflation (CPI)

Graham Tomlin said the "whole thing can snarl up very quickly" and "there is an issue (over whether) the pension fund is going to function at all".

Tomlin explained that two of the trustees elected from members and pensioners are needed to approve a resolution in order for it to pass. With three of this group of six elected trustees having quit the board in recent weeks, only two more therefore now need to oppose resolutions from the airline company to block decisions until new board elections are held in the late summer.

The former trustee added that he was unaware if more trustees are going to resign, however. Commenting on the timing of the three resignations to date, Tomlin said: "This isn't some sort of plot. Mike Post [the first trustee to leave] resigned at the spur of the moment and Cliff [Pocock, the second trustee to resign] went subsequently and I just said, 'this is crazy'. I was fed up of not having any impact and people ignoring logical arguments and therefore I need to conduct the campaign outside of the trustee boardroom."

In a heartfelt interview Tomlin spoke of his disgust that a switch to CPI could amount to a government-backed way to effectively transfer money promised to the scheme's members back to the sponsor company. He said "the criminal thing to me is that it affects old people who are going to have significant parts of their pension taken away at a time they will be living longer and having less public services".

Tomlin confessed that his background as a union representative in decades of redundancy negotiations had made him suspicious of the argument put forward by Paul Spencer, the chair of the trustee board (appointed by British Airways) that a switch to CPI would help the defined-benefit scheme survive in the long-term. Tomlin said "If an employer doesn't want to have a pension fund they will always find a way to get rid of that responsibility. To say, 'keep your demands low in order not to upset your employer' would be ridiculous."

Going political

Tomlin told Pension Funds Insider "the whole point of my resignation is to start political activity" and raised the prospect of the proposed switch to CPI becoming another flashpoint between British Airways and unions representing its employees.

A legal route would also be open to scheme members, he added, saying "if trustees don't go to court to keep RPI [the higher Retail Price Index of inflation] there will almost certainly be a class action from employees against British Airways." Claims that "members were made to believe that they would forever be getting RPI increases" in member communications that together form "a wealth of documentation" are likely to be at the forefront of any legal action.

With scheme members and pensioners already campaigning on the issue, a members meeting scheduled for the summer in Ascot is likely to be interesting, with a 'fighting fund' talked of being collected from scheme members and pensions.

Tomlin said that since his resignation he had been sent correspondence from members criticising him for stepping down instead of fighting the switch to CPI from within the boardroom. He was clearly angered by this, however, saying the scheme "has a one-off opportunity to stop CPI" that would be better served by going public.

APS/NAPS

The much-publicised resignations in recent weeks were from the board of the Airways Pension Scheme (APS), which has close to 24,000 members, of which over 19,000 are already collecting their pension. Most current BA employees are in the newer New Airways Pension Scheme (NAPS), which is not involved in the current dispute.

However, Tomlin speculated that there could be friction between the two schemes if the NAPS is seen to benefit indirectly from reduced funding to the APS should it switch to the lower CPI index. That could compromise the six sponsor-appointed trustees who sit on both boards, says Tomlin.

Switching to the typically less generous inflation index would save the APS scheme an estimated £770m, a saving that all three former trustees have said is unnecessary due to a healthy funding position at the scheme.

dbillingham@wilmington.co.uk

First published 20.04.11