8183 BAA Focus Newsletter (1)

8/14/2019 8183 BAA Focus Newsletter (1)

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The BAA Pension Scheme Newsletter Summer 2008

In this issue

Chairmans introduction

p2

Representing your interests

p4

Investing the Schemes assets

p6

Markets & performance

p7

Retirement planning takes

forward thinkingp10

Protection for your family

p11

Technology rules..ok

p12

Figuring it out

p14Take a walk on the webside

p15

A note for pensioners and

deferred members

p16


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02

introductionChairmans

This edition o Focus reports on the Scheme year ending on

30th September 2007. This edition is being issued later inthe year than in previous years as we have been waiting orthe outcome o the Companys discussions with the Unionsregarding the closure o the Scheme to new members and anopportunity to update you on the Renancing Proposals.

Scheme closure to new members

Since the end o the Scheme year, with eect rom 16th June 2008 the Scheme

was closed to new members. The Trust Deed & Rules will now be updated

to refect the Companys commitment to make no change to the current

arrangements or the provision o Final Salary benets or at least six years, and

this commitment will be extended or a urther six years so long as the Scheme

decit remains below 250 million (calculated on the methodology agreed

between the Trustees and the Company as part o the normal valuation process).

The Company has also stated it has no plans to change the Scheme even ater the

12 year commitment period.

The changes to investments

The changes to investments implemented during the year have reduced the

risk in the Scheme, which should provide improved security or the benet o

all members.

Refnancing o BAAs debt

You may also remember that, at the time o BAAs takeover by the ADI

Consortium, the Trustees negotiated a 300 million security package or

the Scheme as part o the purchase agreement.


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03

This edition of Focusreports on the Schemeyear ending on30th September 2007.

Recently, BAA Ltd has been trying to re-fnance its debt

(raise new money/arrange additional loans at a better

interest rate to pay o the existing debt). The pension

scheme is an important part o this refnancing because

o the security and Company contribution rates agreed

at the time o the takeover. So the Trustees have been

discussing the proposals with the Company and have

reached an agreement that will urther improve the

security o your benefts ollowing the refnancing.

Your new member-nominated Trustee

We have recently completed the election process or

a new member-nominated Trustee and Dean Tully

has recently joined the Trustee Board. There will be

urther elections later this year. To help you understand

more about the Trustees roles and responsibilities inrelation to the Scheme, we have included additional

inormation in this newsletter.

Focus is your newsletter, designed to update you on

the Schemes progress and help you understand any

issues aced by the Trustees and their advisers. So, i

you have any comments or questions, please let us

know by writing to BAA Pensions, Saxley Court,

121-129 Victoria Road, Horley, Surrey RH6 7AS or you

canemail [email protected].

Stuart Condie

Chairman

On behal o the Trustees o the BAA Pension Scheme


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Pensions have become one o the hottesttopics in current aairs, with politicians,pundits and interested parties rom allsides debating the way orward or UK

retirement provision.As a member o the BAA Pension Scheme, you may not

have much infuence on the pensions world in general,

but you can get involved in the running o your Scheme

by becoming a Member Nominated Trustee.

The BAA Pension Scheme is run by BAA Pension Trust

Company, which is quite separate rom BAA Ltd.

Once contributions have been paid into the Scheme

by BAA, they are legally owned by the trust company

and are held entirely separately rom BAAs unds. The

directors o the trust company the Trustees are

responsible or managing the Scheme, investing the

contributions and ensuring the Scheme is run in a

proessional and business-like manner, keeping pace

with the latest thinking and industry best practice.

They have an obligation to act honestly and prudently,

representing the interests o members o the Scheme.

By Law, at least one-third o the Trustees must be

nominated by contributing/employed members andpensioners and the remainder are appointed by the

Company. In the case o the BAA Scheme, 50% o the

Trustees are currently nominated by you, the members,

giving you an even greater say. The Company has

also appointed an Independent Trustee, who brings a

wealth o specialist knowledge, skills and experience to

the trustee board.

04

Representingyourinterests

Your TrusteesChairman

Mr S Condie

Member-nominated TrusteesMr T Armstrong (Aberdeen)Ms L Gregory (resigned November 2007)Mr S F Killick, MBE (Heathrow)

Mr M Roberts (Pensioner)

Company-appointed Trustees

Mr A Hill

Mr A Flower

Other Trustees during the yearTony Ward, OBE, Services Director BAA(resigned 30th September 2007)

Mrs R Rowson (resigned 30th September 2007)

Independent TrusteeThe Law Debenture (BAA) Pension Trust

Corporation plc

Since 30th September 2007:

D Tully Member-Nominated Trustee

(Gatwick) 1st April 2008Ms J Elder Company

appointed 1st September 2008

Member-Nominated Trustees are voted orby members to serve a three-year term.

The election or a new Member-NominatedTrustee or Scotland is underway and the newTrustee will be appointed rom 1st October

2008. Further elections will need to be heldas another two o the Member-Nominated

Trustees complete their three-year term at theend o March 2009.


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05

10 Things

Make themselves amiliar with the

scheme rules and its investments.

Carry out their duties as conscientious,honest and prudent people would indealing with their own aairs.

Act at all times in the best interestso all scheme beneciaries.

Represent the interests o all members(employed, deerred and pensioners).

Not delegate their duties (except wherespecically permitted by law or allowedby the scheme rules).

Seek expert advice in areas where this is

appropriate or required by law (trusteesare not expected to be experts in allaspects o running a scheme).

Take steps to collect all money owingto the scheme.

Hold the schemes assets or the beneto its beneciaries and not pay benetsto other persons.

Record the transactions andproceedings o the scheme and keepproper accounts o the scheme.

Communicate with members,including providing a minimum level

o inormation as required by law.

1

For many people the term Trustee conjures up

an image o worthy, i rather dull, committee

types doing good work in a well meaning but

rather amateurish way. But, i there was ever any

truth to that particular stereotype, those days

have long gone. Nowadays a pension und is big

business and being one o the Trustees responsible

or running a pension scheme is a serious anddemanding job, and getting more so almost day

by day. Ten o the key roles and responsibilities o

trustees are detailed alongside.

that Trustees are

expected to do:

2

3

4

5

6

7

8

10

9

10

The Trustees are not expected to be experts in everything they have responsibility or, so they seek proessional

advice to help them. Details o the appointed proessional advisers are shown below:

Actuarial Advisers

and InvestmentConsultants Mercer Limited

Scheme Actuary Mr C Sheppard oMercer Limited

Solicitors CMS Cameron McKenna LLP

Auditors Mazars LLP,Chartered Accountants

Bankers Barclays Bank Plc

Custodian JP Morgan Chase

Investment Lazard Asset Management Ltd

Managers State Street Global Advisors (SSgA)

Capital International Ltd

Goldman Sachs Asset Management Ltd(removed 31st January 2008 and assetstranserred to SSgA)

Aberdeen Asset Management

Rogge Investment Management

Royal London Asset Management

InvestmentPerormance

Measurement The WM Company


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06

the Schemes assets

Investing

As we conrmed in last years Focus, the proportiono the Schemes assets invested in equities wasreduced to 40% ollowing the change in ownershipo BAA, with a corresponding increase made to theamount invested in bonds.

A urther change was made to the Statement o Investment Principles

in June 2007, detailing how this incresed bond allocation should be

managed with the aim o reducing the impact o fuctuations in the

market on the unding o the Scheme. Under the new approach, allequities are to be managed on a global basis. As a result, the Scheme

switched its investments rom UBS Global Asset Management and

Fidelity Pensions Management Limited who had UK-specic mandates,

and appointed Lazard Asset Management to run a global mandate

alongside Capital International. In addition, State Street Global

Advisors were required to change the way they invest the Schemes

assets. Finally, three new managers Aberdeen Fund Management,

Royal London Asset Management and Rogge Global Partners were

appointed to invest in bonds or the Scheme.

The table below shows the dierent investment managers as at

30th September 2007, and the sort o investments that each manager

is allowed to make.

Since 30th September 2007, the Trustee has removed Goldman

Sachs Asset Management as the Schemes active and passive currency

manager. The passive currency hedging is now carried out by one o

the Schemes other asset managers, State Street Global Advisors. The

assets that were being used to actively manage currencies are currentlybeing held in cash with the custodian whilst a review o alternatives is

being carried out.

Investment Manager Mandate

Aberdeen Fund Management Bonds and swap overlay

Capital International Global equities

Goldman Sachs Asset Management Currency management

Lazard Asset Management Global equities

Rogge Global Partners Bonds

Royal London Asset Management Bonds

State Street Global Advisors Global equities (incl. UK)

derivatives & swaps

Assets m %

Bonds 1,317.2 60

Globalequities 881 40

At30thSeptember2007theScheme

heldtheollowinginvestments:

Bonds loanstoacompanyor

governmentorasetperiodotimein

returnorafxedrateointerest.

Equities companysharesquoted

onstockexchangesaroundtheworld.

Itheyaresoldormoremoneythan

theycosttobuy,aproftismade.

Equitiescanalsomakepaymentsto

theirownercalledadividend.


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Investment markets since30th September 2007It will not have escaped your attention that the nancial markets have been in

turmoil over the past ew months. The nancial gures shown in this publicationrelate to the Schemes position at the end o September but most o the market

problems started later. So what has happened and how is the Scheme aected?

The rst signs o market turmoil appeared as problems with sub-prime mortgage

debt in the US started to surace. These mortgages had been packaged and sold

in bond orm that appeared to oer additional yield with the security o asset

backing and investment grade status rom credit rating agencies. A number o

structured products based on sub-prime mortgages and other lower quality debt

were both highly geared and dicult to value but had attracted investment rom a

wide range o nancial institutions.

Exposure was surprisingly widespread. Small regional

banks in as diverse locations as Germany and Australia

were discovered to have been heavily exposed to the

sub-prime market. Credit conditions began to tighten,

and interbank lending rates became very volatile, as

concerns about the strength o counterparties balance

sheets began to circulate. This resulted in the run on

Northern Rock, and its rescue by the government.

The uncertainty caused by these events caused

investors across the world to move their assets to

investments that are regarded as sae, such as

government bonds. Consequently, equity and corporate

bond markets have generally had negative returns since

30th September 2007 while government bond markets

have had positive returns.

Markets

performance continued

D

08

z


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The xed contributions you pay into the Scheme go

towards the cost o your benets with the Company

paying the balance. All these contributions are paid

into a und within the Scheme which is held and

invested by the Trustees with the aim o gaining

sucient investment returns to pay or the benets

earned by members.

Investment perormance is just one o the actors

which has an impact on the contributions rom

the Company required to pay members benets.

However, i investment perormance is poor, then

the Scheme may not have sucient assets to pay

or the benets earned by members (known as

a decit) and the Trustees may need to ask the

Company to pay higher contributions. The volatility o

stockmarkets in recent years is one o the key actors

that have led to the majority o nal salary pension

schemes alling into decit.

As agreed with the ADI Consortium as part o the

acquisition o BAA, and outlined in the last edition

o Focus, revisions were made to the Statement o

Investment Principles (which details how the Scheme

is invested) with the aim o reducing the key nancial

risks o the Scheme. This change has already been

a positive one or the Scheme, as it means that

the credit crunch has had less o an impact on the

Scheme than it would have done otherwise. Closingthe Scheme to new members will also reduce the risks

to your benets and enable urther switching to saer

less volatile investments.

Full valuations (nancial assessments) o the Scheme

are carried out every three years with interim annual

reviews, so that the Company and the Trustees can

make sure that the value o the Schemes assets and

contributions paid in keep pace with the cost o

members benets. The latest ull valuation (as at 30th

September 2007) is being worked on at present andthe results i nalised by then will be included in your

annual Summary Funding Statement to be issued in

September 2008.

you?

you?09

How does the Schemesinvestment performance affect


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10

Retirement planning

takes forward

thinkingNo-one likes to think they will not have enough money toenjoy their retirement. So, when planning your retirementthere are several key questions you need to ask yoursel.

Remember,itsnever

tooearlyto

startplanning

oryour

retirement.

What is your target pension?

How much money do you think

youll need or a comortable

retirement? Whats the minimum

income youll require to enable you

to do all the things youd like to do?

While youll probably save on certain

items, such as the cost o travelling

to work, and you may have paid o

your mortgage, youll still have bills to

pay and you need to bear in mind the

eects o infation the rising costs o

goods and services will have an impacton the purchasing power o your

savings over time.

At what age do you want to retire?

You may be thinking about retiring

early but you need to remember that

the earlier you retire the lower your

pension is likely to be. This is because,

as your pension is likely to be paid

or longer, each monthly payment islower to help balance out the longer

payment period.

Will you earn any income duringretirement?

You may decide to take on some

part-time work and the money you

earn will help boost your monthly

retirement income.

Your company pension may not

be your only source o pension

income. You should look at the latest

statements and illustrations o all your

possible pensions, as well as other

long-term savings and investments you

may have.

The State pension is unlikely to give

you enough to live on in retirement,

but it will be an extra contribution to

your nances. You can usually ask or

a orecast o your likely State benets

by completing orm BR19 available atyour local Social Security oce or by

applying online at:

http://www.thepensionservice.gov.

uk/atoz/atozdetailed/rporecast.asp

Please note: due to reorganisation

within the Pension Service, the

forecasting service is unlikely to be

available until later this year. Well give

you further news when we can.

What impact will retirement have onyour amily?

Once youve retired your dependants

will lose the lump sum lie assurance

cover payable rom the Scheme should

you die in the Companys service beore

you retire. However, pensions will be

paid to your spouse or partner and

children i you die during retirement.


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Protection for your

Nobodylikestodwelltoolongonthesubjecto

death,butitheworstdoeshappenitsgoodto

knowthatyouramilyanddependantswillbe

fnanciallysecure.The Scheme provides a package o benefts designed to help

provide fnancial security or your dependants in the event oyour death. So, it is worth spending a little time reviewing theScheme booklet to make sure both you and your dependantsunderstand the circumstances in which benefts are payable.This could save a lot o conusion and misunderstanding at adifcult time.

In summary, i you die as a member o the Scheme:

your spouse or registered civil partner will receive a pension,

payable or the rest o his or her lie. I you are not married, the

Trustees have the discretion to pay the pension to a dependant;

i you are still employed by the Company, your dependants will

normally receive a cash lump sum. To avoid inheritance tax, the

lump sum is payable at the Trustees discretion. This means they

have the nal say over who receives the lump sum. Normally

they will ollow your wishes provided they have been notied o

them beorehand.

Expressyourwishes

Its important that you let the Trustees know your wishes. You can do

this by completing an Expression o Wish orm. The orm is used toindicate to the Trustees who you would like to receive any lump sum

or dependants pension payable. Its particularly important that you

complete a orm i you dont have a spouse but do have someone living

with you and who is nancially dependent on you. The Trustees will

take this into account in their decision making process.

Remember also to keep your orm up to date i your circumstances

change or example, i you get married or have children.

Expression of Wish forms are available on request from the

Pensions Department.

family


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12

Technologyrulesok

These days, hand-written letters and hard copy les have given way to emails

and computer records. Much o the inormation held about us rom credit

card details to telephone bills and even pension scheme rights is kept oncomputer. Wed all like to think this modern way o storing data is 100% sae

and reliable but, as one large well-known retailer ound to its cost, computers

can go missing.

You may remember hearing about

the problems that one company

had when one o its laptops was

stolen. Unortunately the laptop heldthe personal details o many o the

companys employees who, naturally

enough, were concerned about who

might have access to their private

inormation and what they might use

it or.

And then we had the loss o

HM Revenue & Customs (HMRC)

computer discs containing the

child benet records o millions o

claimants. Apparently proper security

procedures werent ollowed.

In February this year, an MOD laptop

was stolen that contained personal

details o 600,000 recruits and

potential recruits, including their

passport numbers, National Insurance

numbers and bank details.

WhataboutourScheme?

To administer the Scheme eciently,

the Trustees need to hold inormationabout you and your entitlements.

Without this inormation we may not

be able to make sure you and your

amily get the benets youre entitled

to when payment time comes.

All the inormation we collect rom

you is kept ully secure and is only

released to others who need to use it

or valid reasons, such as:

our pensions administrators who

set up your pension;

uture employers when you

change jobs.


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13

Holdingsensitiveinormationaboutyou

As Trustees, we are registered under the Data Protection Act 1998.

This Act treats personal inormation as sensitive which means that it cant

be disclosed to anyone not authorised to have it. We can only disclose

personal data we hold on our records to other authorised parties.

By sensitive inormation we mean things like:

your age and date o birth;

whether you are married or in a civil partnership;

your salary inormation;

your National Insurance number.

Howweaimtoprotectyourdata

To minimise the risk o loss, thet or unauthorised access o your personal

details and individual records, sotware security systems are in place to

prevent anyone hacking into systems rom outside the Company and all

BAA computers and laptops have secure password protection.

IntroducingtheBAAPensionSchemewebsiteThe Trustees are currently developing an internet site or the Scheme,

which members and pensioners will be able to access to nd out the

latest inormation about the Scheme including:

up-to-date news about your pension scheme;

Scheme acts & gures;

the latest edition o Focus;

copies o the pension Scheme booklets;

copies o the Expression o Wish orm and Added Years orm that you

can print, complete and return should you wish to make changes.

The site is scheduled or launch towards the end o 2008 and we will

be in touch with you with urther details and inormation as to how to

access the site in the run up to the launch.


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Figuring it outFiguring it outFinancial highlights as at 30th September 2007

Membership at 30th September 2007

Income

Contributions rom members 15,466

Contributions rom Company 70,717

Transers in 4,992

Investment income 64,281

Total 155,456

Spending (000s)

Pensions 51,233

Payments or leavers 2,909

Lump sums (on retirement or death) 28,714

Admin expenses and ees 8,849

Total 91,705

What its all worth (000s)

Value o Scheme assets as at 30th September 2006 2,087,456

Income spending 63,751

Change in market value o assets 46,378

Value of Scheme as at 30th September 2007 2,197,585

++

==

Active members Pensioners Deferred members

47.1% 35.3% 17.6%9,510 = 7,140 = 3,554 =


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Take a walk

on the webside

You can get useul inormation about pensions and

retirement planning rom the ollowing websites:

www.dwp.gov.uk or government initiatives and

inormation about retirement and pension benets.

www.pensionsadvisoryservice.org.uk thewebsite or The Pensions Advisory Service (TPAS);

contains ree help and advice about all types o

pension arrangement.

www.pensions-ombudsman.org.uk the

Ombudsman investigates complaints and disputes that

scheme members cannot resolve with their trustees.

www.thepensionsregulator.gov.uk the site o theregulator o work-based pension schemes in the UK.

www.thepensionservice.gov.uk visit this site or

all you ever wanted to know about the State scheme.

You can also get help nding pension schemes you

have belonged to in the past, through the Pension

Tracing Service.

www.ageconcern.org.uk a useul website

or those who have retired; contains all sorts o

inormation and opportunities.

www.helptheaged.org.uk with advice on

nances, healthcare, age discrimination issues and

a ree telephone helpline, this is another website

dedicated to the needs o those who have retired.

www.ifap.org.uk use this site to nd a local

Independent Financial Adviser.

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Any questions?I you would like to nd out more about anything

covered in this issue, or have any questions about

your individual benets, you should contact the

Pensions Team.

The Pensions Team can also supply you with

copies o any o the Schemes ocial documents

(or example, the Report and Accounts,

Statement o Investment Principles or Trust

Deed and Rules).

Write to:

BAA Pensions

Saxley Court

121-129 Victoria Road

HorleySurrey

RH6 7AS

Tel: 01293 821 717

Email: [email protected]

Closing the Scheme what does it mean for me?As detailed in the Chairmans introduction, the Scheme has now been closed to new members. While the

Company discussed this proposal with Unions and current employees, as a deerred member or pensioner,

you were not involved in the Companys consultation.

We would like to reassure you that closing the Scheme to new members will have no impact on

the benefts paid to anyone who is currently a member or pensioner o the Scheme. The pensions

paid to current pensioners are not paid or by contributing members o the Scheme. When you were

employed you and the Company contributed to the Scheme with the aim o building up enough money to

pay your pension in retirement. I there is insucient money to pay or the pensions that have been promised(or example as a result o alls in stockmarkets) the Company has to meet the additional cost.

The Trustees powers have not been changed as a

result o the Scheme closure and the Trustees will

continue to take whatever action is appropriate,

in both the short and the longer term, to maintain

the security o your pension benets. In the light

o the Scheme closure, the Trustees are currently

reviewing the investment strategy and considering

any impact in relation to the actuarial valuationas at 30th September 2007, which is currently

underway.

A note for pensioners anddeferred members:

16

Documents

8183 BAA Focus Newsletter (1)