British Airways Makes Proposal to Erase Pension Deficit

March 23, 2006 ( - British Airways has said it will clear its 1.4 billion pound pension plan deficit through a combination of higher retirement ages, a slower accrual rate and a cap on increases.

Reuters reports that once the company’s proposal is accepted, it has said it will make a payment of 500 million pounds into the pension fund. The proposal must be approved by unions and pension trustees.

However, according to a news report, the Transport and General Workers Union said it would resist the changes. National officer Brendan Gold said in the news report, “The proposal as presented to the T&G is both unfair and unacceptable and does not represent a starting point for negotiations. BA is a profitable company not one in crisis. It must be remembered the pensions are deferred earnings.” The British Airline Pilots Association (BAPA) also said it had several concerns about the proposal.

The retirement age for cabin crew would rise to 65 from 55 and for pilots to 60 from 55, under changes to the way pension benefits will be calculated, according to Reuters. In addition, pension increases would be capped at 2.5% each year, and pensionable pay increases would be no more than inflation, under the proposal.

BAPA made it clear at the beginning of company talks regarding the pension plan that it would not accept a proposal to increase pension participants’ contributions to the plan (See British Airline Pilots Fight Pension Contribution Increase ).