New pensions insecurity at British Airways – are you affected?
Written by Sam Barrie on October 03, 2017.
Another day, another pensions crisis. This time it is the turn of British Airways employees to face uncertainty over their pensions as the airline announced last month that it is proposing to close its defined benefit pension scheme.
17,000 BA employees belong to the company’s New Airways Pension Scheme (NAPS) which is facing a ‘significant and growing funding deficit’ according to a spokesperson. The proposed closure would mean that existing members will no longer be able to pay into the scheme, which has been closed to new employees since 2003.
In spite of BA pumping huge cash injections totalling £3.5bn into the scheme, the combined force of record low interest rates and increased life expectancy have increased the deficit to £3.7bn this year. This gives BA the dubious accolade of having the biggest pension deficit relative to company value in the UK, although the award for biggest deficit goes to Royal Dutch Shell whose black hole is an eye-watering £72.8bn.
Many of the biggest British household names are struggling with deficits in the billions including BT, Lloyds, Royal Bank of Scotland, BP and Barclays. They all face the same problem: put simply, the money earned from their investments does not cover their liabilities. A big part of the problem is the falling yield of government bonds, which are at record lows and therefore no longer providing the safe income for pension schemes that they have in the past.
Talks are ongoing between British Airways and unions but, whatever the outcome, it looks likely that members of the airline’s pension scheme will be less well off in retirement than they expected. Unfortunately, they are unlikely to be alone – it is a case of when rather than if employees of other big name companies will face a similar bombshell.
Are you affected by this closure, or the closure of any other pension scheme? Are you worried that your retirement finances will be insufficient? If you have any concerns about your pension scheme and its funding position, please feel free to get in touch for a no-charge, no-obligation review.