BA to increase retirement age

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The Independent Online

British Airways is to increase the retirement age for its pilots and other workers in a bid to tackle a £1 billion deficit in its pension fund, the airline announced today.

Union leaders were told that the airline will pay £500 million into the scheme once the planned changes were accepted.

The current compulsory retirement age for pilots and cabin crew is 55 but BA plans to increase this to 60.

Chief Executive Willie Walsh said: "This is a solution that will provide competitive, affordable pensions for the future."

Mr Walsh said: "These changes are necessary to clear the past deficit and to contain the amount of future funding needed.

"It means working longer to get a similar annual pension but one that is more secure.

"This should address the pension problem at British Airways once and for all."

Mr Walsh said the planned changes will reduce the anticipated deficit in the pension scheme by £450 million.

"This package of measures is vital if we are to achieve a competitive cost base, deliver a 10% operating margin, be fit for growth and invest in our future."

The Transport & General Workers Union, which has 20,000 members at BA, said the pension rescue plans would mean "more pain" for the workforce.

National officer Brendan Gold said he believed the package of measures could have been brought forward some time ago to give unions more time to study the details.

He said injecting £500 million into the scheme only on condition that staff accept the changes was an "unnecessary touch".

He went on: "If the money was there it should be put in up front to show the company recognised its responsibilities properly.

"It was no secret that BA's pension funds were in deficit but we still don't really know if today's measures will be the right ones for our members and for the scheme."

Ed Blissett, National Officer of the GMB union, said the proposals would have a "highly detrimental" effect on BA's workers.

"It will mean they are working longer for a smaller pension. We will be seeking urgent meetings with BA to see if it is possible to improve on the proposals.

"Once negotiations have concluded we will refer back to our members for their decision on whether they are acceptable. If GMB members feel it necessary to oppose changes, the union will support them."

BA said that if changes to the pension scheme were not introduced, the deficit and level of future contributions would grow because people were living longer and long-term interest rates remained low.

The airline announced that the retirement age for cabin crew will increase to 65, leaving some union officials to point out that workers faced having to work 10 years longer before receiving their pensions.

The airline pointed out that pilots in other countries worked beyond 60.

The pension scheme has almost 34,000 active members, 20,000 deferred members and 15,000 pensioners.

It provides a final salary pension based on length of service.

The pension scheme was in deficit by around £2 billion last year but this has since been revised downwards.

BA said it had the biggest pension deficit in the top 100 companies in the country, relative to its size.

The deficit had grown significantly from £221 million in 2000 to almost £1 billion, largely because people were living longer and interest rates remained low.

The next valuation is due in the autumn and BA said it was expected to be worse, even though it had doubled its contributions.

BA stressed that under its proposal a final salary pension scheme will be retained, although changes will be made to future benefits.

It pointed out that under age legislation to be introduced in October, the normal retirement age of workers will be 75.

The airline said transitional arrangements will be made for cabin crew whose working life will increase by 10 years under today's plan.

The airline said it will have paid £350m towards the pensions' deficit by the end of the year, adding that it will pay a further £500m once the planned changes were accepted, which would "virtually wipe out" the deficit.

The unions said that BA had achieved £800m a year of savings at the expense of more than 13,000 jobs, and warned that the job implications of today's plans had not yet been spelt out.