UK – The head of the 2.4 billion euro pension scheme for UK airport operator BAA Plc says pension administrators should not follow fashion and try to work out their requirements for themselves.
“Don’t be a dedicated follower of fashion, think about it, and work it out for yourself,” is BAA Pension Fund director Stuart Condie’s advice to pension administrators wondering whether to choose defined contribution or defined benefit schemes.
He disagreed with those who say defined contribution schemes are less risky and cheaper to operate than defined benefit schemes. “It all depends on how much risk you want to take,” he said. Due to rising stock markets, the BAA fund has had a contribution holiday since 1996, Condie said – arguing that it’s not possible to be cheaper than that.
He said legislation such as FRS17, which requires funds to provide a snapshot of their liabilities, do not increase risk, because the risk is already there.
“Closing DB schemes is a statement that you don’t care about your employees’ welfare,” Condie, who is also BAA’s chief economist, told a conference in London.
BAA, which operates airports such as Heathrow and Gatwick, has both defined benefit and defined contribution schemes, Condie says. DB schemes are designed for its highly-trained safety and technical staff – whom BAA wishes to retain on a long-term basis. In its retail units, where a high staff turnover is more acceptable, staff are offered DC schemes.