Grumpy Accountant

It all looks so reasonable…..

On the face of it, many people will understand BA’s decision, announced in July, to negotiate the use of £330 million of its staff pension fund’s assets to help the company through a difficult trading period.    But, as carefully spun as the announcement was, it hides something fundamentally wrong behind its facade of preserving jobs, something we all have to be in favour of.

That something is that, when the business was alledgedly thriving, BA’s management apparently decided that it would be a good wheeze to pass on the benefit of their profits to top management and shareholders while simultaneously denying the pension fund access to £330 million.     How did they do that?    Easy-peasy – don’t give the pension fund cash, give it a bank guarantee that we’ll pay some time later.    And now, when the s*** hits the fan, who do they ask to cough up?    Not top management, not the shareholders, but the employees who stand to lose part of their pensions if, as must be distinctly possible, BA can never pay the £330 million.    And this on top of the £3 billion current deficit in the pension fund that some say already makes BA technically insolvent.

It is of course the responsibility of its trustees to protect the pension fund but what realistic chance do they have of fulfilling that responsibility when their arms are twisted behind their backs.    Logically, the best they can hope to achieve is the preservation of at least some of the pension funds.

And, apparently, BA isn’t the only company replacing cash commitments with what are termed “contingent assets”.  It was reported in The Guardian on 18 July that, over the last 5 years, other leading British companies have been doing much the same thing.

In June, Barclays announced plans to close its final salary pension scheme to existing members, compromising pensions for about 17,000 staff – but excluding 1,500 of the bank’s top earners.      How much were the bonuses on the sale of Barclays Global Investors?

There’s no escaping the near certainty that benefits for most employees will have to be cut because there just won’t be enough cash available to meet these commitments.     And there’s no escaping the truth that longer life expectancy and our ageing population are major contributors to that problem.     But, not for the first time in the recent past, it’s not the business owners or top managers, those who have benefitted most in the past, but the vastly superior number of employees who are expected to pick up the tab.

Would it be appropriate to describe BA’s and Barclays’ management of their pension commitments as being based on the mushroom principle:  “keep ’em in the dark and periodically spray s**t on them”?   Whether or not that’s fair, these events have all the hallmarks of yet more arrogance and greed at the top of British business.


17/08/2009 - Posted by | Observations | , , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: