British Airways is to change the pension provision it makes for future new UK employees, moving from a defined benefit final salary basis to a defined contribution basis from autumn 2002.
The decision will not affect the pension benefits of the 65,000 members of NAPS, the New Airways Pension Scheme, or the 36,000 members of APS, the original Airways Pension Scheme, which was available to employees who joined before 1984.
The decision follows a thorough internal review of the company’s UK pension arrangements taking into account the changing competitive environment, new accounting rules (FRS17), volatile markets and rising life expectancy.
Under FRS17, APS/NAPS taken together generate a company accounting shortfall of £394 million as at March 31, 2002. APS/NAPS have investments together valued at nearly £10 billion. Both schemes meet the statutory Minimum Funding Requirement (MFR). The FRS17 valuation does not have any impact on cash flow.
John Rishton, British Airways’ Chief Financial Officer, said: “The change to a defined contribution pension arrangement for future new UK staff is a measured and necessary response to the competitive environment in which British Airways operates. It does not affect the pensions of existing APS/NAPS members.”