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BAE pension liability widens by €1.3bn

UK – BAE Systems’ total pension liability has widened by £884m (€1.3bn) due to falling discount rates.

The aerospace and defence company said it is talks to deal with its deficit, which has grown to more than £2.8bn under the IAS19 reporting standard – from £2.0bn before.

It said: “The increase in liabilities of £884m mainly reflects a decrease in the UK real discount rate from 2.6% to 2.3% and a decrease in the US real discount rate from 2.9% to 2.3%.”

This was “partially mitigated” by better than expected returns on assets. The actual return on assets above the expected return was £221m, it said.

“Pension funding is an issue for the company and employees alike,” said chief executive Mike Turner in BAE’s half-yearly earnings statement.

“Together we have already taken a number of important steps to close the funding deficit and I believe that with the constructive approach taken by all parties we will agree a plan to fully address this issue in the near future.”

The company said it is in “consultation” with employees about ways to address the deficit, which is likely to require an additional cash contribution.

Elsewhere, UK Coal says it is still “vigorously defending” a pensions claim in the High Court.

It is facing a claim to determine whether it may be required to provide certain early retirement pension related benefits on redundancy. It says the case may cost more than £40m, up from an estimate of £20m six months ago.

The case is due to be heard in the High Court during December 2005.

Also in the UK, broadcaster ITV said it plans cut its pension deficit with a £325m lump sum. This, along with “expected investment returns” would enable the scheme to “move towards a fully funded basis”.

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