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BA: Pension deficit tops £2 billion

 
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Jim Mason
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PostPosted: Fri May 19, 2006 1:32 pm    Post subject: BA: Pension deficit tops £2 billion Reply with quote



Pension deficit tops £2 billion

BA Press Release 19/05/06

British Airways' accounting valuation of its main pension scheme, the New
Airways Pension Scheme (NAPS), showed a deficit of £2,070 million at March
31 2006, up £101 million on the previous year.

Keith Williams, the airline's chief financial officer, said, "The
accounting deficit reflects low long-term interest rates and has gone up
despite the company's increased contributions and strong equity markets."

Ends

Notes to editors

· British Airways adopted International Financial Reporting Standards
(IFRS) on April 1, 2005. The deficit is now accounted for under IAS19,
rather than FRS17.

· In the company's accounts, of the £2,070 million, £1,587 million is
recognised on the balance sheet and £483 million is unrecognised. The
unrecognised amount occurs as a result of a smoothing mechanism allowed
under IAS19 ("the corridor") in respect of changes in estimates in both
scheme assets and liability benefits earned. The variations in estimates
for asset returns and discount rates are the principal factors impacting
the deficit.

· The company's pre-tax pension liability for all schemes in deficit
increased from £2,191 million to £2,290 million. Of the £2,290 million.
£1,791 million is recognised on the balance sheet (£1,587 million for NAPS
and £204 million for other schemes in deficit) and £499 million is
unrecognised (£483 million for NAPS and £16 million for other schemes in
deficit).

· At March 31, 2005 the total NAPS IAS19 pre-tax deficit (recognised and
unrecognised) was £1,969 million.

· The NAPS actuarial deficit at March 2003 was £928 million.

· The airline's cash contribution to NAPS in 2005/6 was £246 million.


The airline's proposal on pensions announced on March 23, 2006 includes:

· Keeping a final salary pension scheme with no changes to past service
pension benefits, no increase in staff contribution rates but changes to
members' future benefits.

· Changes include raising the normal retirement age, a slower accrual rate,
pensionable pay increases capped at no more than inflation and pension
increases on retirement capped at 2.5 per cent each year, with the company
and staff to share impact of changes in life expectancy.

· In return, the airline will make a payment of £500 million into NAPS
after the changes are accepted.


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