British Airways has proposed a new pension scheme which it has said will improve benefits for more than half of the airline's UK employees.
It follows BA’s decision earlier this month to close the larger of its two defined benefit pension schemes because of a “significant and growing” funding deficit.
Under the proposals, the 17,000 members of the New Airways Pension Scheme (NAPS) will be moved to a “more flexible” retirement fund.
Once in the new scheme, staff would be able to choose between a non-contributory option, higher employer contributions than under the existing defined contribution scheme or the opportunity to take the employer contribution as cash.
A spokesman for BA said these choices would represent a “significant upgrade” for more than half its employees who are members of the current scheme, the BA Retirement Plan.
Steve Gunning, British Airways' chief financial officer, said: "Our proposal today (21 September) – very importantly - will help secure the benefits our colleagues have already earned in NAPS, and also offer better terms to colleagues in our existing defined contribution scheme.
“In addition, it will allow us to continue to invest in products and services for our customers to strengthen the business for everyone.”
BA has proposed that employees would become members of the new scheme from next April.
The company will provide a choice of transitional arrangements for staff moving from NAPS to the new scheme, including lump sum options and access to higher contribution rates.
A consultation on the pensions proposal is now under way, but trade unions Unit and GMB have threatened industrial action over the closure of the pension scheme.
Since 2003 BA has pumped £3.5bn into NAPS, but the deficit was estimated to have risen to £3.7bn by March this year, when measured on an accounting basis.
The 2015 formal actuarial valuation put the NAPS deficit at £2.8bn.
A spokesman for BA has stated that if NAPS remained open to future accrual, the cost to the company of providing future benefits to its members could increase to about 45 per cent of an individual's pensionable pay in future years.
damian.fantato@ft.com
