British Airways (BA) has been granted leave to appeal a High Court ruling that found in favour of the Airways Pension Scheme (APS) trustees’ power and decision to award discretionary pension increases.
In the case of British Airways v Airways Pension Scheme Trustee, the airline disputed the trustees’ decision to amend scheme rules in order to award discretionary increases to members of the pension scheme, as well as their decision to award a 0.2% discretionary increase.
The APS trustees introduced the discretionary power in 2011 in response to a change to the index on which the Pensions Increase Review Order (PIRO) is based. In 2010, the government announced that PIRO, the practice the APS uses to increase pensions, would be based on the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI).
The High Court ruled against British Airways in the case, finding that the amendment to the scheme rules was valid and effective. It also ruled that a November 2013 decision to award a 0.2% discretionary increase was within the scope of the discretionary powers and that the trustees had given regard to all relevant considerations and to no irrelevant considerations when making the decision.
A spokesperson at British Airways said: “Given the risks that remain within the scheme, we believe the deficit contributions should be applied to improve funding and reduce risks, not improve benefits. There are 26,000 members in this pension scheme, 98% of whom are already retired and on far more generous pensions than succeeding generations of British Airways employees. Last year, British Airways made payments of more than £500m toward pension fund deficits.”
Rosalind Connor, partner at ARC Pensions Law, added: “In one sense, the move by BA to appeal this decision is very understandable, [it is] saddled with a scheme where the trustees alone can amend the rules, and the present judgment gives [it] very limited ability to challenge this, which could give rise to much larger increases to benefits.
“On the other hand, the decision at first instance was quite emphatic, and the judge did comment that the trial was ‘lengthy and expensive’, obviously with some disapproval that all this time had been taken; BA risks more of the same commentary at the Court of Appeal.”
The Airways Pension Scheme trustees declined to comment.