The former chairman of the Airways Pension Scheme (APS) has told the High Court trustees of British Airways' (BA) other pension scheme must accept their decision to award a 0.2% increase.
Continuing to give evidence on 23 November, Paul Spencer said "there is nothing" New Airways Pension Scheme (NAPS) trustees can do about the decision and should therefore accept it.
BA is contesting the increase, which was on top of the Consumer Price Index (CPI) and was awarded for the 2013/14 financial year. The move was made to recompense members after the scheme was converted from the Retail Price Index (RPI).
Speaking at the trial, Spencer recalled how NAPS trustees were unhappy to hear of the June 2013 decision.
"They were very surprised and angry about not being told about the decision," Spencer said. "APS' stance was we didn't take a firm decision and weren't going to say where we'd got to the company or to NAPS or the regulator."
After finding out about the decision, NAPS member-nominated trustee (MNT) Ian Bretherton had said the decision was "highly provocative and inappropriate" and questioned how employer-nominated trustees (ENTS), who sit on both scheme boards, could justify the decision.
However, Spencer said the comments were mainly due to NAPS trustees not having the power to award discretionary increases.
"Once it is clear to him that NAPS aren't going to get the same deal, he doesn't want APS to have them," he continued. "From a NAPS point of view, it was not in the best interest of NAPS. The whole of NAPS trustees would not like this decision. But they have to accept it; there is nothing they can do about it."
Questioned on why, in November, the trustees had rounded their increase from 0.15% to 0.2% after having just voted against 0.2% as an increase, Spencer said it was to avoid court costs. The difference added £3m to the cost of the increase.
"My understanding was that if you had agreed to take a decision to pay an increase that was different you had taken before, there was then doubt as to which of the two decisions was the right decision," Spencer said. "We would potentially need to go to court to get that resolved.
"I did not want to go to court and spend a huge amount of money, lawyers and time for something that demonstrably wasn't worth the difference. I was trying to avoid that on behalf of the trustees.
"I won't have cared which decision the court decided. I just didn't want to go to court."
Spencer's claims back up comments made by fellow ENT Charles Maunder who, earlier in the trial, said court action would be "money that was not well spent".
Spencer was followed by member-nominated trustee Paul Douglas, who was elected to the APS board in 2011. In his election statement, at the time, Douglas had affirmed the scheme was "one of the best funded schemes in the UK".
Questioned on the statement, made at a time when the scheme was in a substantial deficit, Douglas said the deficit had to be considered in its wider context.
"Almost throughout my career from the late 80s until 2006, [APS] had a very substantial surplus, so much so BA had enjoyed a pension holiday," he said. "In 2007, when I retired, we had just completed the valuation. It was pretty much in balance.
"The 2009 valuation… showed a significant deficit but that had to be seen against assumptions that sat behind it [and] the conservative investment policy it had.
"It was still a robust statement because in comparison with most large defined benefit pension schemes, APS is at the very good end of the spectrum. It was in a very strong position. It was and it is."
He also defended his description of CPI as a "swindle" in the same election statement.
BA's lawyer Michael Tennet QC said the dictionary definition of "swindle" related to "fraudulent transactions". He said Douglas' use of the word was "completely over the top and misleading".
Douglas responded arguing his use of the word was not meant to convey that meaning but stood by his belief that members were being hit by the change.
"I certainly had no intention to communicate that," he said. "We are talking about a situation where people have that long-held expectation [of RPI] dashed by a move to CPI.
"It wasn't just the employees but also the index that was in the mind of the employer at the time as well. I think the government had done a very tough thing. APS was unfortunate collateral damage on this and pensioners had been very sorely done by."
Douglas will continue giving evidence on 24 November, after which he will be followed by fellow MNT Stephen Mallett. The case is due to conclude on 9 December.
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