British Airways to close New Airways Pension Scheme to future accrual
British Airways is set to close the New Airways Pension Scheme to future accrual and launch a flexible benefits scheme incorporating a new defined contribution pension scheme.
The airline said the move comes after consultation with the airline's trade unions and employees.
The new scheme will open on 1 April 2018 and replace the airline's main UK defined benefit scheme, the New Airways Pension Scheme (NAPS), and its main UK defined contribution scheme, the British Airways Retirement Plan (BARP).
The changes are subject to NAPS trustees agreeing to amend the scheme's rules to enable closure to future accrual.
British Airways said 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.
It active NAPS members will also be offered a choice of transition arrangements -including a cash lump sum, additional company pension contributions or additional pension benefits in NAPS prior to its closure.
British Airways said the overall financial impact of the changes would depend on the transition arrangements members select.
NAPS opened on 1 April 1984 and closed to new joiners on 31 March 2003. It represents around 47% of BA's active employees currently with 52% in BARP.
British Airways said the changes are aimed at addressing the rising cost of future pension provision and the volatility in the NAPS scheme, which had a deficit of £2.8bn at its last valuation, as at March 2015.
The next valuation will be as at March 31, 2018, but will now reflect the closure of the scheme to future accrual.
BA said the NAPS pension liabilities will be reduced by the closure of the scheme to future accrual as the valuation of pension liabilities currently assumes growth in the pensionable salaries of active members up until retirement age.
Following closure, British Airways said members' deferred pensions will be increased annually by inflation (measured by CPI), which is generally lower. The value of the reduction will only be known once members have selected their transition options, as some of the options allow members to select additional pension benefits in NAPS prior to its closure, which will partly offset the reduction.
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