Pensions update – BAE in talks on fund hole

BAE Systems is in negotiations with trade unions about proposals, including a £500m employer funded payment, to reduce a £2.8bn pensions deficit for its defined benefits schemes.

The deficit is predominantly made up by a £2.4bn shortfall recorded for the main pension scheme in 2005 following an actuarial valuation as well as a shortfall in a second DB scheme.

In addition to the employer offer of £500m, ten other measures are being considered to help clear the funding shortfall in accordance with the Pensions Act 2004.

These include revising the enhanced early retirement benefit, payable to those who are made redundant, so that a reduced cap is placed on payments to be paid to the DB scheme.

But there are no proposals on the table to increase member contributions. These contributions were last increased back in 2003, when they were raised from 5% to 9.29%. At the same time the company raised its contributions from 11.7% to 18.21%.

Richard Colthart, head of UK media relations at BAE, said: “There are a raft of other things. The process is on going and it’s impossible to tell when it will be completed. But it does not involve people putting money in their pockets again, that will be avoided.”