British Airways (BA) is to launch a consultation on the proposed closure of one of its defined benefit (DB) pension schemes to future accrual.
Under the proposals, the New Airways Pensions Scheme (NAPS), which has approximately 17,000 scheme members, would be closed to future accrual. The changes aim to address the scheme’s funding deficit.
The consultation is due to commence in the coming weeks.
In addition to NAPS, the organisation also has the Airways Pension Scheme (APS), a DB arrangement. Its defined contribution (DC) pension scheme, the British Airways Retirement Plan (BARP), has 20,000 members.
A spokesperson at British Airways said: “Since 2003, the airline has pumped £3.5 billion into NAPS, but the deficit, resulting from record low interest rates and increased life expectancy, had risen to £3.7 billion by March this year. It is the largest of all UK [organisation] pension deficits relative to the [organisation’s] overall financial value.
“In 2017 alone, the airline will pay £750 million in pension contributions and has already committed to provide between £300 million and £450 million a year [until] 2027 to address the NAPS deficit. If NAPS remained open to future accrual, the cost to the [organisation] of providing future benefits to NAPS members could rise to 45% of individual’s pensionable pay in 2018, more than four times the typical employer contribution of UK airlines.”
Spokespeople at unions GMB and Unite said: “Unite and GMB within British Airways must express on behalf of our members and in the strongest possible terms, both our dismay and bitter disappointment at the news that British Airways has announced its intention to close its main pension scheme. Thousands of loyal and long-serving staff, who have helped build British Airways into a world-class flag carrier for this country and one of the most recognisable global brands, now face uncertainty in their retirement.
“Our team of financial analysts has worked tirelessly with the airline over the last few months to explore ways to keep the pension scheme open and secure it for the future. This announcement sadly confirms that our advice has gone unheeded and that we have been unable to convince British Airways that keeping the scheme open is the right thing to do, for both the [organisation] and its employees.
“Instead of certainty, many will now face uncertainty as their retirement approaches. We would expect better treatment of its own staff from such a ‘premium brand’. Both unions jointly demand urgent talks to discuss both the impact of this announcement, if a solution can be found and, if not, the consequences the airline may face.”
John Moore, head of industrial relations at the British Airline Pilots’ Association (BALPA), added: “It is bitterly disappointing that BA is now seeking to close NAPS to future accrual and thereby remove a highly valued employment benefit. At the same time, we cannot ignore the significant funding problems identified by BA and will continue working with the airline to mitigate the impact of any changes and improve the DC pension scheme.”