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BAE Systems reduces pension deficit to £1.9bn

UK - The pension fund of aerospace group BAE Systems saw the deficit in its UK defined benefit pension plans reduce from almost £3bn (€4.4bn) at the end of last year to £1.9bn at the end of June.

Higher than expected returns on assets, additional contributions and a change in assumptions for calculating liabilities contributed to improving the schemes' financial situation.

Assets in the defined benefit plans returned £53m more than expected while £66m in additional contributions brought the total of employer contributions since year-end 2006 to £222m.

BAE saw its pension liabilities increase by £198m by changing its mortality assumptions using the most recent tables published by the Institute of Actuaries.

However, this was offset by a 30bp increase in real discount rates decreasing liabilities. Other changes in assumptions added £914m to BAE System's UK pension assets.

The group negotiated a combination of increased contributions, benefit reductions and cash payments with the unions last year, to address the deficit of the £12.6bn hybrid scheme pension fund.

It also announced some of the approximately £1.2bn (€1.7bn) proceeds from the sale of its 20% stake in airbus might be used for pension contributions.

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