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British Airways plans to close its main final salary pension scheme and replace it with what it called a more flexible retirement saving plan that will help it tackle its £2.8bn pension deficit.
BA owner International Airlines Group said that after consulting with trade unions and workers the British flag carrier would scrap its New Airways Pension Scheme – its final salary plan – as well as its main defined contribution scheme.
The final salary scheme, which promises workers a guaranteed portion of their working income in retirement, had already been closed to new members since 2003. Now people who had joined that scheme before 2003 and have been paying into the plan in the expectation of a final salary-based income in retirement would be moved into other arrangements, from April, IAG said.
Around 47 per cent of BA staff are members of the final salary retirement plan.
According to IAG’s statement:
International Airlines Group’s subsidiary British Airways has decided, following consultation with its trade unions and employees, to launch a flexible benefits scheme incorporating a new defined contribution pension scheme.
The scheme will open on April 1, 2018 replacing the main UK defined benefit scheme, the New Airways Pension Scheme (NAPS), and the main UK defined contribution scheme, the British Airways Retirement Plan (BARP).
The changes are subject to NAPS trustees agreeing to amend the scheme’s rules to enable closure to future accrual.
The new scheme will offer market-competitive arrangements with a choice of contribution rates and the ability to opt for cash instead of a pension. Active NAPS members will also be offered a choice of transition arrangements including a cash lump sum, additional company pension contributions or additional pension benefits in NAPS prior to its closure.
The overall financial impact on British Airways will depend, in part, on the transition arrangements.
BA first announced the closure of the NAPS scheme in September, then carried out a consultation with its workers and their representatives. At the time BA said that it had poured £3.5bn into NAPS since 2003 but still not managed to get the funding deficit under control.