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British Airways wins court appeal over discretionary pension increase

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British Airways (BA) has won the latest round of its five-year legal battle with the trustees of the Airways Pension Scheme (APS) in a UK court decision that could have wide-ranging ramifications over who has ultimate control of companies’ pension funds.

The UK’s Court of Appeal today ruled that BA would not have to pay a £12m (€13.6m) discretionary payment granted by the trustees of APS in 2013. The trustees had acted to compensate for a move by the fund away from the benchmark inflation retail prices index (RPI) to the consumer prices index (CPI), which tends to be lower.

In 2010, government civil service pensions moved to adopt CPI as their measure of inflation – and the 0.2% bump introduced by the trustees was designed to boost benefits by 50% of the difference between the CPI and RPI increases.

Founded in 1974 following the merger of four airlines, BA was privatised in 1987. However, the airline’s pension fund – as part of a former state sector company – is still bound by public sector pension rules.

In a statement, BA said it was “pleased with the decision, which brings clarity over how the scheme should be administered”.

Mark Blyth, a litigation partner at law firm Linklaters, which acted on behalf of BA, added: “The judgement is complete common sense – why should the trustees be the scheme’s paymaster?”

However, APS said in a statement to its scheme members that it was “analysing the full implications of the judgment” and assessing the next steps, including a possible appeal to the UK’s Supreme Court.

“The Court of Appeal’s decision does not change the high court judge’s findings that the-then APS trustees and their advisers acted appropriately in relation to the 2011 and 2013 decisions,” the statement said, referring to moves made by the trustees to grant the discretionary pension increase – and the subsequent 0.2% increase. 

The trustees for the scheme, who have been granted the right to appeal, were backed by the Association of British Airways Pensioners (ABAP), which said it was “bitterly disappointed” with the decision.

“This means that yet more BA pensioners will not live to see any benefit from the modest rise proposed by the scheme’s trustee in 2013,” said Mark Fielder, chair of ABAP.

The association urged the trustees to “not give up the fight”.

However, Fielder warned: “The total costs of this legal action are not yet known but are quite likely to exceed the cost of paying the rise in the first place.”

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