The BAE Systems Pension Scheme has announced it has reached an agreement with its plan sponsor, the British multinational defence, security, and aerospace company BAE Systems, which has proposed a contribution worth £1bn (€1.2bn).

The move follows details of its latest actuarial valuation, as of 31 October 2019, which highlights the need to accelerate deficit recovery contributions into the BAE System’s section of the pension fund in the coming months.

The Airbus Section of the scheme is unaffected by these developments, it said. The next actuarial valuation for that section will be undertaken as at 31 March 2020.

Following the merger on 1 October 2019 of its pension schemes – the BAE Systems 2000 Pension Plan, the Alvis Pension Scheme, the Shipbuilding Industries Pension Scheme and the BAE Systems Pension Scheme – the new trustee board agreed with the company to bring forward the actuarial valuation of the BAE Systems section to 31 October 2019 from the previously scheduled date of 31 March 2020.

The fund said the actuarial valuation of the section showed a funding level of 92% with a deficit of £1.9bn. The trustees have now agreed to a new deficit recovery plan with BAE Systems with the one-off payment of £1bn.

The scheme said this payment represents an acceleration of deficit contributions that would otherwise have been payable in the period to 2026 under the pre-merger recovery plans of all four merging schemes.

Furthermore, in line with those recovery plans, around £240m of deficit funding will also still be paid by 31 March 2020 followed by approximately £250m by 31 March 2021, it added.

Before agreeing the basis and outcome of this actuarial valuation and the new deficit recovery plan, the trustees took professional advice and consulted The Pensions Regulator (TPR).

Later in the year the trustees will provide section members with a funding update which will include further information about this actuarial valuation.

The effective date of the next BAE Systems section’s actuarial valuation must be no later than 31 October 2022, but trustees expect that it will be 31 March 2022.

The next actuarial valuations for the other UK defined benefit schemes – the Royal Ordnance Pension Scheme, the Royal Ordnance Senior Staff Pension Scheme and the BAE Systems Executive Pension Scheme – are unaffected and  will be as at 31 March 2020.