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British Airways sues trustees over additional indexation offer

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British Airways is suing the trustees of one of its pension funds over their decision to grant additional indexation, despite the scheme’s £680m (€813m) deficit.

Trustees of the £7bn Airways Pension Scheme (APS), the older of the UK flag carrier’s two DB arrangements, said they had decided to increase benefits by 0.2%, in addition to the 2.2% indexation already offered to members, in line with the UK consumer prices index (CPI).

However, the scheme sponsor said it was “concerned” by the precedent set by offering further benefit increases.

The airline said in a statement: “If allowed to stand, this decision can only add to the scheme’s liabilities and make resolution of the deficit more difficult.

“We regret that the trustees have not heeded concerns expressed by both ourselves and the Pensions Regulator.”

APS trustee chairman Paul Spencer said the trustee board’s approach to additional indexation was prudent and that its estimated cost of £12m over the lifetime of the scheme was affordable.

He added: “We are naturally disappointed that BA has taken the step to test our decision to grant an increase in court but remain convinced that we have acted in the best interests of the scheme members and are pleased that the extent of our powers will now be clarified for the future.

A statement from the trustees added that the 0.2% additional increase was only half of the difference between the CPI and retail prices index (RPI) – the measure employed until recently to offer statutory indexation.

The airline said it did not believe the long-term security of benefits should be put at risk “for the advantage of retirees who already enjoy more generous pensions”.

“In these circumstances, we are left with no alternative but to pursue legal action with the objective of preventing the additional increase going ahead.”

APS noted that the court proceedings would not affect the 2.2% increase in benefits, but that the additional increase would only be applied once the case had been resolved.

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