Unions reject BAE pension sweetener

BAE Systems has offered its workers a compromise settlement for meeting the cost of the £2.2bn hole in its pension fund.

However, unions said yesterday the group's plans did not go far enough to safeguard retirement benefits. The Transport and General Workers' Union has been locked in negotiations with the defence contractor for the past three months, after BAE Systems announced plans to close its final-salary scheme and force workers to plug the shortfall or accept lower pensions.

To meet the spiralling costs of its pension scheme, BAE Systems has asked its 57,000 staff to increase their contributions or switch to a new scheme that does not guarantee the same level of benefits.

It wanted workers to meet half the additional funding costs with a 2 per cent hike in contributions, with BAE paying the other half.

BAE has put a new proposal to staff that would see it make up 60 per cent of the increased costs, with workers paying 40 per cent. BAE has also offered to phase in the increase, and vowed that existing workers' final-salary benefits would not be put at risk. It has also promised that workers' contributions will be the first to reduce should the pension scheme become overfunded in the future. The T&G said "there was some way to go before there is a final deal".

The proposals will now be put to staff. Plans to close the final salary scheme to new entrants are still going ahead.