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British Airways to Close Pension Plan

The airline’s proposal to close its defined benefit plan to future accrual has sparked anger among union officials.

  • Joe McGrath

British Airways may face more worker strikes after announcing plans to close its defined benefit scheme to future accrual and slash benefits for the 17,000 staff already enrolled.

The company has proposed moving staff to a defined contribution arrangement after closing its £13.1 billion ($17.3 billion) New Airways Pension Scheme – or NAPS — to future accrual next year. The airline’s DC plan – the British Airways Retirement Plan – currently has 20,000 members.

Trade unions Unite and GMB said they received the news with “bitter disappointment” and called for British Airways to immediately engage in talks about the impact of their proposals. They said in a joint statement if a solution cannot be found that the airline may face “consequences.”

The NAPS scheme closed to new joiners around 15 years ago and about half the company’s pilots are now enrolled, according to the British Airline Pilots Association. The airline said its proposed changes were made reluctantly, but that it had no choice as low interest rates have reduced returns for the pension fund while life expectancy is increasing.

“If NAPS remained open to future accrual, the cost to the company of providing future benefits to NAPS members could rise to 45 percent of individuals' pensionable pay in 2018 — more than four times the typical employer contribution of U.K. airlines,” a British Airways spokeswoman said in a statement.

She added that the proposed changes to the DB plan will help protect the benefits that members have already accrued while freeing up cash for the company to invest in the business.

British Airways said that since 2003 it has used £3.5 billion of company money to shore up NAPS.

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An increasing number of British companies are moving to close or modify their defined benefit schemes. In May, the Royal Mail said changes to its pension plan were afoot because its DB scheme had become “unsustainable.”

British Airlines has faced resistance from employees for reasons unrelated to its retirement plans, as well. Earlier this year members of the company’s mixed fleet cabin crew — who are not in the NAPS scheme — went on strike for a total of 60 days in a dispute over pay.