UK – Defence and aerospace giant BAE Systems has agreed to inject just over £1bn (€1.46bn) into its pension funds in a bid to tackle its £3.1bn pensions deficit.
According to the firm’s revised UK pension funding arrangements, it will make a one-off contribution of £1.087bn in cash and assets, including property, over the next 10 years. A total of £661m (£480m in assets and £181m in cash) will be transferred in 2006, said BAE.
Furthermore, BAE and employees will also have to bump up their pension contributions, and benefits will be changed and clipped to reduce future liabilities.
“We have worked in close consultation with our employees, trades unions and scheme trustees to develop pension arrangements acceptable and affordable to both the company and its people,” said BAE Systems chief executive Mike Turner.
“Pension scheme funding has been a challenge for the company but I am delighted that we have now completed these revised arrangements through the constructive approach of all concerned.”
A BAE spokesperson told IPE that the company had increased its pension contributions from 11.7% to 18.21% over a staged three-year period. Employees of one of the schemes had also increased their contributions from 5% to 9.29% between April 2003 and April 2006.
At the end of 2005, the company had a total pre-tax IAS19 pension deficit of £5.3bn. This shrunk to roughly £4.2bn in May, and recent valuations have now pegged the deficit across the four schemes at £3.1bn, said BAE.
In February, BAE announced plans to help plug its main pension fund deficit with roughly £240m in property assets and £110m in cash.