UK - British Airways has dismissed fears that its pension deficit threatens the future of the firm.
Analysts estimate the deficit has soared to nearly £1.5bn – roughly equivalent to the firm’s total market capitalisation.
The firm’s schemes had a FRS17 pre-tax deficit of £488m in April, but analysts point out that BA’s schemes hold over £5bn in equities which have lost 20% since April.
Broker UBS Warburg estimates that BA’s total pension obligations are worth about six times its market capitalisation. It added that BA, which was until this month part of the FTSE100, is number nine on its top 10 list of “at risk” pension funds.
A City analyst claimed: “Forget about possible war in the Gulf, BA chief executive Rod Eddington should be losing sleep over BA’s pension problems. At the same time as BA falls out of the FTSE100, its pension deficit has ballooned.
“Sooner or later, a big UK company is going to go bust because of its pension fund and it could be BA. What happens then to the 90,000 plus members of the BA pension scheme if it goes bust?”
One senior consultant agreed and said a “handful” of major firms are at risk, especially those in “very mature industries”.
However, a BA spokeswoman dismissed the claims and said: “Post September 11 we did an informal valuation and we are comfortable with the outcome of that. The next valuation is in March 2003 and until then it would be entirely inappropriate to speculate on surpluses or deficits.”
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers