UK - The UK's two leading budget airlines are cutting back on staff pensions in a bid to stay competitive in a hostile market.
Ryanair has taken steps to freeze the final salary scheme it inherited from rival Buzz after the firms merged earlier this year. And it has told former Buzz employees to transfer into a new defined contribution scheme.
Easyjet is also planning to freeze contributions into The Go Fly Group Personal Pension Scheme following its acquisition of Go Fly Airline.
The company will cease paying contributions to the Go scheme from July. Existing Go members are being given the opportunity to stay in the scheme – supplied by Standard Life – if they wish.
Easyjet is also giving the 300 employees acquired as part of the merger the option to transfer to the Easyjet Group Personal Pension Scheme. Easyjet will make contributions of 5% or 7% – depending on income and position in the company.
But this figure is substantially lower than that prescribed by the Trades Union Congress, which believes employers should be compelled to pay at least 10% of pensionable salary into a DC scheme.
Over the past two years airlines have been hit by the travel slump following the September 11 terrorist attacks, the recent Sars health scare in Asia and the war on Iraq.
British Airways, which closed its final salary scheme to new entrants this month and opened a new DC plan in its place, reported a 10.1% drop in turnover in the year ending 2002.
BA’s New Airways Pension Scheme is believed by analysts to hold a deficit up to £3.2bn.
Mercer Investment’s European partner Matthew Demwell said the airline industry was suffering and stressed “when everyone is in the same boat as their competitors, they look to make extreme measures”.
He added: “The challenge is which companies can make the best of a difficult situation, be creative in their responses and effective in the way they communicate with their employees and shareholders.”
*The Transport & General Worker’s Union fears Air Canada, which has debts of £5.6bn, may also make cuts to its UK pension scheme.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.