British Airways to close its main defined benefit scheme
IAG, which also owns the likes of Vueling, Iberia and Aer Lingus, said that following consultation with its trade unions and employees, British Airways has decided to launch a flexible benefits scheme incorporating a new defined contribution pension scheme.
The scheme will open on April 1, 2018 and will replace the airline's current main UK defined benefit scheme, the New Airways Pension Scheme, and its main UK defined contribution scheme, the British Airways Retirement Plan.
The new scheme will offer market-competitive arrangements with a choice of contribution rates and the ability to opt for cash instead of a pension, IAG said.
Active members who currently have a New Airways Pension Scheme will be offered a choice of transition arrangements including a cash lump sum, additional company pension contributions or additional pension benefits in the New Airways Pension Scheme prior to its closure.
IAG said the changes are subject to trustees agreeing to amend the scheme's rules to enable closure to future accrual, and added the overall financial impact on British Airways will depend, in part, on the transition arrangements members select.
These changes are aimed at addressing the rising cost of future pension provision and the volatility in the New Airways Pension Scheme scheme, which at its last valuation as at March 2015 had a deficit of GBP2.8 billion.
The next valuation will be as at March 31, 2018, but will now reflect the closure of the scheme to future accrual. ■