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Last Updated: Monday, 8 January 2007, 19:08 GMT
New BA pension details revealed
Recent fog at Heathrow airport
The fog of uncertainty is clearing around BA's pension scheme
British Airways has revealed details of its plans to close the 2.1bn deficit in its pension fund.

If agreement with four trade unions is forthcoming then members of BA's main pension scheme will have to work longer or pay higher contributions.

The company is also going to inject up to 950m into the fund in the next three years, and pay a further 280m in each of the next 10 years.

The deal will affect nearly 34,000 flying crew and ground staff.

The BA chief executive Willie Walsh said: "We have come a long way with our staff, trustees and trade unions on this issue.

"We have worked together and have now concluded our discussions on one of the biggest challenges facing the airline," he said.

BA had claimed that failure to resolve its pension deficit would threaten the existence of the company.

When it first announced its plan, in March 2006, to cut the cost of its pension scheme the proposals threatened to lead to a major industrial dispute at the company.

The deal

Currently, ground staff pay 5.25% of salary towards their pension and retire at ages between 60 and 63.

Flying crew are currently able to retire at 55 and pay in 6.5% of salaries a year.

Under the new proposals, staff who want to pay just 5.25% will now have to retire at 65.

And any staff member who wants to retire at 60 can chose to pay 8.5% a year.

In a further cut back in the generosity of the scheme, from now on the pensions will build up at a slower rate than before.

BA tail fins
BA says cutting pension costs will mean buying new planes

However these new terms will apply only to future service, earned from next April when the new contribution structure comes into force.

"These changes only affect future service, they don't affect past service", said Keith Williams, BA's chief financial officer.

Meanwhile, any BA employee who wishes to draw their pensions at 55 will have to pay 17.5% a year.

The company says the combination of higher contribution rates and longer working will knock 400m off its overall pension deficit.

The airline will also limit future pensionable pay rises to just the prevailing rate of inflation, so any pay increases above the rate of inflation will not count towards a person's pensions.

However, a further cost-cutting proposal - to limit pension growth in retirement to no more than 2.5% a year - has been dropped and this will remain at 5% a year.

Negotiations

The deal with the unions has been struck after nearly nine months of negotiations.

Brian Boyd of Amicus said: "Amicus are satisfied that we have been able to negotiate a package that will minimise the benefit reductions required to eradicate the current BA pensions deficit."

The deal covers the members of the New Airways Pension Scheme, which was closed to new joiners in 2003.

It has 20,000 deferred BA staff - people who have left BA but have not yet retired - and 15,000 pensioners.

Neither of these groups will be affected by the plan.

Mr Williams said: "Without having resolved it (the deficit) the company's contribution would have gone from 235m a year to around 500m a year, which would not have been acceptable in the long term."


SEE ALSO
BA shares rise on pension talks
08 Jan 07 |  Business
BA closer on pension resolution
06 Jan 07 |  Business
BA offers retirement concession
16 Nov 06 |  Business
BA offers pension funding scheme
15 Nov 06 |  Business
BA pension deficit to hit 2.1bn
29 Sep 06 |  Business
BA set to raise staff pension age
23 Mar 06 |  Business

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