UK – Airline firm British Airways has said its new defined contribution pension scheme will not provide the same benefits as its established defined benefit schemes.
“Our DC scheme is not going to provide anything like the same benefits as our DB schemes,” said Mervyn Walker, director of UK airports at BA and chairman of trustees and the group’s two DB schemes, known as APS and NAPS.
He said the company was not focusing on this issue now as it currently has a lot of other issues to worry about.
“The most important pension issue is that the company remains viable,” Walker told a conference organised by the National Association of Pension Funds. But he said that this wasn’t obvious to the average employee.
Walker said BA has found its discussions with its unions “very difficult” – and that it’s well-publicised pensions deficits were only seen by staff as the company’s problem. “The reality is it’s a problem for everyone involved.”
“We have to persuade people to share the burden the company faces.”
The new DC scheme, known as BARP – the British Airways Retirement Plan – was launched in 2003 and currently has 1,501 members and assets of 1.1 million pounds, Walker said.
APS, or Airways Pension Scheme, and NAPS, the New Airways Pension Scheme, are worth six and four billion pounds respectively. The schemes are 906 million pounds and 2.7 billion in deficit.
Walker said APS has been gradually moving into bonds, reflecting the maturity of the scheme – while there were now immediate plans for NAPS to move towards bonds.
The company decided to launch a new DC scheme in part due to industry and competitive pressures. Its US peers had been able to “walk away” from their DB obligations under US chapter 11 rules, while its newer UK rivals had never had DB coverage.
“We went for a pure DC scheme for competitive reasons,” Walker said, also citing lower risks, simplicity and flexibility.