British Airways to close pension scheme

News


08 Dec, 2017

British Airways to close pension scheme

British Airways has revealed plans to close the larger of its two final pension schemes, and launch a flexible benefits scheme that should help fund investment.

The airline said the new scheme, which will open on 1st April 2018, comes after it consulted with airline trade unions and employees. The new plan will replace the airline's main UK defined benefit scheme, the New Airways Pension Scheme (NAPS), and its main UK defined contribution scheme, the British Airways Retirement Plan (BARP).

The changes need to be agreed to by NAPS trustees who will amend the scheme's rules to enable closure to future accrual.

British Airways said the new scheme will offer market-competitive arrangements with a choice of contribution rates and the ability to choose cash over a pension. This will come in the form transition arrangements, for which active NAPS members can choose a cash lump sum, additional company pension contributions, or additional pension benefits in NAPS prior to its closure.

British Airways said the general financial impact of the changes would depend on the transition arrangements members select.

NAPS opened on 1 April 1984 and closed to new joiners on 31 March 2003. It represents around 47% of BA's active employees currently with 52% in BARP.

British Airways said the changes are meant to address the rising cost of future pension provisions and the volatility in the NAPS scheme, which had a deficit of £2.8bn at its last valuation, as at March 2015.
The next valuation will be as at March 31, 2018, but will now reflect the closure of the scheme to future accrual.
BA said the NAPS pension liabilities will be reduced by the closure of the scheme to future accrual, as the valuation of pension liabilities currently assumes growth in the pensionable salaries of active members up until retirement age.

After the closure announcement, British Airways said members' deferred pensions will be increased annually by inflation (measured by CPI), which is generally lower. The value of the reduction will be announced after members have selected their transition options, as some of the options allow additional pension benefits in NAPS prior to its closure, which will slightly offset the reduction.

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