BA unions warn of action over plans to raise retirement age

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Unions at British Airways threatened yesterday to ballot their members on industrial action after the airline unveiled proposals to plug the £1.4bn deficit in its pension scheme by raising retirement ages and capping benefits.

BA has offered to inject £500m into its main pension fund to help clear an actuarial deficit which stood at £928m in March 2003 - but only if pilots agree to an increase in their retirement age from 55 to 60, cabin crew accept a rise from 55 to 65, and all staff accept slower accrual rates and the capping of pensionable pay increases at the rate of inflation.

Willie Walsh, BA's chief executive, calculated that the concessions being asked of employees would contribute £450m towards the anticipated increase in the deficit since 2003, allowing the airline to resolve its pension problem "once and for all". He described the package of proposals as "fair" and said he saw no reason why it should provoke industrial action.

However, the Transport and General Workers' Union said the proposal was "both unfair and unacceptable and does not represent a starting point for negotiations", while Ed Blissett, the national officer for the GMB union, said: "We will try to improve these proposals and if they can't be improved we will ballot our members over this."

Mr Walsh insisted that BA had to have the backing of its staff for the package as a whole before making the £500m cash injection, arguing that in the past other companies had agreed to increase payments only to see the deficit continue to rise after employees had refused to accept new pension terms.

BA's main New Airways Pension Scheme has 34,000 active members, just over 20,000 deferred members and a little over 15,000 pensioners. In 2003 the scheme was closed to new employees who now join a defined contribution scheme. So far BA has injected £350m to help plug the deficit.

A new actuarial valuation of the scheme has just begun and is due for completion in the autumn when it is expected to show a further rise in the deficit. Mr Walsh said that even if staff accepted the proposals, which will inject a further £950m into the scheme, there would still be a small but manageable deficit.

In addition to slower accrual rates and raised retirement ages, BA is also proposing to cap annual increases in pensions for retired employees at 2.5 per cent compared with 5 per cent at present. Staff who have already retired would not be affected.

The British Airline Pilots Association (Balpa), which has been even more vocal in its opposition to any erosion of pension entitlements, said it had some concerns about the proposals but would discuss them with its 2,500 BA members before reaching a final verdict.

Because pilots' pay goes up by increments the more seniority they attain, they will be less affected by the inflation-linked cap which BA has proposed. In the longer term, however, BA said there was a possibility of raising the retirement age for pilots to 65 if age restrictions imposed by some countries such as France and the US were lifted.