British Airways (BA) might face industrial action, as unions are demanding urgent talks to discuss the consequences of the airline deciding to close the larger of its two final salary pension schemes.
According to FTAdviser sister newspaper the Financial Times, BA unveiled plans yesterday (7 September) to address the “significant and growing funding deficit” faced by the New Airways Pension Scheme (NAPS).
If its proposals are implemented, the NAPS, which has 17,000 members, would be closed to future accrual.
Unite and GMB unions issued a joint statement on this matter, stating that “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”.
“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,” they said.
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,” Unite and GMB said.
BA said that if the scheme remained open for members, the cost to the company of providing future benefits could increase to 45 per cent of individual’s pensionable pay in 2018.
This was more than four times the typical employer contribution of UK airlines, the airline said.
“Since 2003, the airline has pumped £3.5bn into NAPS, but the deficit – resulting from record low interest rates and increased life expectancy – had risen to £3.7bn by March this year,” a spokesman for BA said.
BA confirmed that the £3.7bn deficit was measured on an accounting basis, and not the actuarial deficit used to drive contributions by both employers and employees. At its last formal valuation by actuaries in 2015, the deficit was £2.8bn.
The airline is not the only company in talks with unions over its pension scheme.
Communication Workers Union announced this week that it would give formal notification to ballot its roughly 100,000 members at Royal Mail, after talks with management failed to deliver a resolution.
Earlier this year, the UK postal operator announced it would be closing Royal Mail Pension Plan, its current defined benefit (DB) scheme, to future accruals from next year.
Following union opposition, the company is now offering members the choice of joining either a DB cash balance scheme or a defined contribution scheme.