It has been a long time since we saw a pension strike in the UK. Royal Mail is the obvious example and that was nearly seven years ago.
The Sunday Times is not slow to make the link between the Boeing pension strike in America and what Royal Mail staff struck for in 2017
“I certainly wouldn’t say no to anything that provides a defined benefit to our members”
said John Holden of American union the IAM.
In the UK , Boeing staff do not get a defined benefit pension promise. This is what they get.
Benefits
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Salary and bonus – competitive base pay, annual performance-based incentives and recognition programmes.
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Healthcare – individual BUPA healthcare for every employee, as well as a cash-plan option for increased cover for family members.
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Financial security – 2:1 company pension contribution, life assurance policy and financial well-being education.
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Career development – sponsored tuition fees for further education, professional registrations, memberships and qualifications as well as employee development programmes to learn new skills.
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Family friendly – competitive policies for maternity, paternity and adoption leave, along with flexible working.
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Community – industry-leading gift match programme, and volunteering opportunities.
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Travel – season ticket loans to help with the cost of commuting and individual insurance for business travel.
The UK workforce knows as well as its US counterpart, that Boeing does not offer them a DB plan. The 2:1 scheme is a DC plan which offers £2 from the employer for every pound a staff member pays into a DC pot.
Boeing can look at three options today
- They can re-open the Boeing Defence UK Ltd. Pension Scheme
- They can open a Royal Mail style CDC plan
- They can look to convert DC pension pots to DB pensions as they fall due
Boeing is not unionised in the UK but it boasts a number of social initiatives and clearly considers itself a good employer (see above).
Pension options in the UK are well in advance of those in the US (where Boeing’s $74B Defined Contribution Plan does not offer a pension option).
Now Boeing has the option to show its American parent how it can meet pension demand by adopting one of the three options above.
The UK stands ready.
2:1 sounds fine doesn’t it?
30yr old, 5% contribution, employee adds 10%, that’s 15%. Half the savers age. Which should give a decent pension pot.
Am I to understand the standard contribution guidance for DC from ~ 2000 to 2015 was wrong?
The contribution side works with decent pots and 2:1 , probably the investment side too. Yet Boeing workers in the States are striking because they want a pension. They have a huge DC plan but they want a pension.
We miss this here too, we think that the product is a pot, but people are fed up with pension pots!
I understood the most recent offer from Boeing in the USA which was rejected by the Union members included a 12% employer contribution plus a $5,000 one off payment into the employee’s 401K plan.
https://www.investmentnews.com/retirement-planning/at-boeing-pension-plan-is-up-in-the-air-and-401k-is-grounded/257872
Those figures look very generous by UK standards.
The pressure for defined or targeted pension benefits is trans-Atlantic!
Nothing stops Boeing from changing the non elective employer contribution (excluding any matching contributions) currently contributed to the 401k into a money purchase pension plan, with updates to be negotiated.
I assume they have a frozen DB plan, so the accrued benefit in the money purchase pension plan could be transferred to the DB at separation.
Depending on the frozen DB plan funded status, they could also do an IBM and reopen the DB to take advantage of any excess reserves (if there are any).
Boeing’s DB pension plan reported underfunding of $5.4 billion in 2023. (Even though the plan stopped enrolling new employees in 2014, employees previously enrolled retained their accrued benefits.) Coupled with the increased wage demands from striking workers—who on Wednesday voted against a tentative deal to raise pay by 35% over four years—it’s said to be a tough sell to re-open it.
Boeing is losing money, to the tune of about $8 billion losses for the first nine months of 2024, including a one-off charge of $5 billion in the third quarter. The corporation’s share price is down 40% this year, and the continuing strike isn’t helping its finances since it can’t build planes to order without workers.
“Given the state of affairs in the company’s balance sheet, the ask for a defined benefit program restart would seem to be a non-starter on a number of levels,” Wolfe Research analyst Myles Walton wrote in a Wednesday note.
I’m (easily) impressed that Boeing’s 401(k) has $74bn of assets (at least according to LinkedIn) compared with only $49bn in the DB plan.
The Boeing 401(k) plan’s asset allocation has been reported as 61% fixed income, 16% global equity, 8% private equity, 8% real estate and other real assets, and 7% hedge funds.