BA NAPS Pension - Revaluation Doubles Defecit
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Actuarial valuation sees BA pensions deficit reaching £2.1b
Graham Dunn, London (29Sep06, 14:00 GMT, 529 words)
British Airways’ (BA) deficit in its key pensions scheme has doubled to around £2.1 billion ($4 billion), a fresh actuarial valuation released today has shown.
The actuarial valuation, which is carried out every three years, shows the deficit in BA’s New Airways Pension Scheme (NAPS) is set to rise from £928 million to around £2.1 billion.
BA says it would need to make annual contributions of nearly £500 million – raising its contribution from five to 12 times that of members – to fund the pension scheme if it remains unchanged.
The Oneworld carrier last October began a communications campaign to raise awareness of the pensions deficit, which comes despite a doubling of BA contributions and a stock market recovery, and in March this year put forward proposals aimed at tackling the deficit.
These include raising the age of normal retirement from the current compulsory 55 to 60 for pilots and ultimately to 65 for cabin crew; inflation-capped pensionable pay increases and capped pension increases on retirement. But BA notes it would remain a final salary scheme – rather than one linked to career average earnings – and involves no increase in staff contribution rates.
If the changes are accepted, BA will make a £500 million one-off payment into the scheme
BA CEO Willie Walsh says: “The deficit is massive and we must deal with it. I believe our proposal is a fair solution which addresses the funding problem and shares the cost of securing the future of our pensions and BA.”
Since making the proposals in March, BA has been in talks with unions and trustees. A spokesman for the carrier says talks with unions are continuing.
The proposals came under fire from unions when first introduced and one union, the T&G, has already reiterated its concerns today.
T&G national secretary for civil aviation Brendan Gold says: “We have always acknowledged that there is a funding problem but today’s news does not change our view that BA’s pension cuts are unfair, unacceptable and do not represent a starting point for negotiations. The company is profitable, has been reducing debt and is not in crisis.”
British Air Line Pilots Association secretary general Jim McAuslan describes the deficit as “eye-watering”, although he says the union will ask its own actuary to review the assumptions made by the scheme’s accountants.
“BALPA starts from the premise that BA is responsible for this deficit and their proposed contribution of £500 million is just not enough – and that ‘working until you drop’ is not a solution either,” says McAulsan. “But there is no denying that the deficit announcement is a stretch, so finding a negotiated way through is important both to BALPA members and the airline.”
He says the union will continue to consult its members – which have so far indicated they are seeking choice rather than a one-size-fits-all solution – while also taking a long-term view. “Pension valuations change and pension negotiations are for life, not just around gloomy valuations. Any negotiated changes this time must have a reverse gear,” he says.
BA’s NAPS scheme was launched in 1983 and has nearly 70,000 members – 33,500 of whom are still active members. The scheme was closed in March 2003.
Source: Air Transport Intelligence news