Trustee directors of the Airways Pension Scheme (APS) have settled their legal battle with British Airways, leading to backdated payments being awarded to members.
BA and the APS had been in dispute over pension increases since a government decision in 2010 stated pension increases would be made in line with the consumer prices index, instead of the retail price index.
RPI generally runs about 1 percentage point higher than CPI.
The rules for the BA scheme provided for pension increases to track increases to public sector pensions, so the chancellor's announcement affected increases granted to APS members.
In 2013, trustees of the APS made amends to the rules of the scheme, which gave them the power to grant pension increases to retirees on a discretionary basis. It exercised that power by granting a 0.2 per cent increase from December 1, 2013. This was half the difference between RPI and CPI.
Subsequently, British Airways took the trustees to court to overturn the decision and, last year, won in the Court of Appeal, making the amendment invalid.
Today (April 9) the trustee directors announced they have reached an agreement with British Airways.
As part of the settlement, which is to be put towards the Supreme Court later this year, scheme trustees will have the power to award discretionary increases, subject to affordability tests, so that by 2021 they are in line with the RPI.
Furthermore, the APS members will also receive a one off lump sum payment to cover the period from 2013 to April 2019 when no discretionary increases were paid.
According to the trustee directors, the terms agreed with British Airways "better serve the interests of the APS members than continuing with the appeal to the Supreme Court".
Steve Webb, director of Policy at Royal London said: "It is good to see an end in sight for this long-running dispute.
"Protracted legal disputes often mean that money that could be spent supporting the pension scheme is spent on lawyers.
"The proposed solution appears to have a welcome element of flexibility built in, which will mean members should get larger payouts but the employer has some flexibility if the funding position of the scheme deteriorates."
The APS was closed to new entrants in 1984, and currently has more than 25,000 members.
