The 1,310 members of a Flybe pension fund have been told that there is a hole in their scheme of up to £80m, and no government safety net to protect them, as it is based in the Isle of Man.
The British Regional Airlines Group pension scheme had assets of £138m but liabilities of £217.7m when valued in December 2018 on a “buyout” basis, according to a note put out by its trustees in the wake of Flybe’s collapse.
Usually, with pension schemes in the UK, employees qualify for 90% protection from the Pension Protection Fund (PPF) if their company is declared insolvent, while retired members are 100% secure. But the trustees confirmed that no such protection existed for the collapsed airline’s workers in the scheme, although it added that “the lack of PPF coverage has been regularly communicated to members (most recently on 10 February 2020)”.
The scheme’s large deficit does not affect the majority of people working for Flybe at the time of the collapse, as it is largely a historic fund comprising the pension savings of staff who were at Manx Airlines, British Airways CitiExpress and other brands acquired by Flybe, plus some of Flybe’s own staff. It has been closed to new members since 2002.
But the scale of the funding deficit will cause alarm among the 1,310 members, who now face a nervous wait to learn what will happen to their pensions as Flybe is wound up.
In December 2018, Flybe acknowledged that there was a significant shortfall in the pension plan, and began to make special contributions of £250,000 a month to close the gap. But the recovery plan for the scheme required Flybe to make the contributions every month until 2030 – which will now not be forthcoming.
In a note to members, the trustees of the scheme said: “The trustee and Flybe put in place a 12-year recovery plan that was intended to complete 1 December 2030. So far, in accordance with the recovery plan agreed with the trustee, Flybe has paid into the scheme 12 monthly payments of £250,000 and a separate payment of £830,000 on 28 June 2019.
“However, in light of its administration, it is anticipated that Flybe will not be in a position to meet the next monthly payment of £250,000 due at the end of March 2019.”
But the trustees added that they were engaging with the Connect Airways consortium, which acquired Flybe in February 2019, about what funding it would now provide.
It said: “The trustee and its advisers are engaging with Connect to determine whether Connect will be in a position to honour its obligations under a guarantee that the trustee negotiated with Connect in respect of Flybe’s funding commitments under the recovery plan.”
The emergence of the Isle of Man base for the pension scheme – and the lack of protection for scheme members – has alarmed pension experts. Last week the former pensions minister Steve Webb, now at the pension consultants Lane, Clark & Peacock, said: “The creation of the Pension Protection Fund was designed to stop this happening, but the Flybe case shows that there are still gaps in the safety net. The government needs to do more to alert workers whose firms would not be protected by the PPF so that other workers do not end up in the same position as Flybe staff.”
