BAE Seeks To Eliminate Pension Deficit
BAE Systems has finalised a plan to eliminate its huge pension fund deficit.
BAE Systems, the UK's biggest defence contractor, will pay an extra £1.1bn into its pension fund over the next ten years in cash and assets to help eliminate the deficit, which stood at £3.1bn at the end of 2005. Both the company and its staff will also pay higher regular contributions. The scheme will provide reduced benefits in the future, but will be kept open for current members.
The plan was first outlined in February this year and has now been agreed with the scheme's trustees and the trade unions.
The pension scheme, which has already been closed to new members, has the largest pension fund deficit of any company in the private sector. To save £770m, other changes have been agreed:
A formula to reduce the expected pension if longevity improves further, but
1) Allowing staff to work beyond 65 to offset that reduction
2) Calculating the pension on the average pay in the final three years at work, not just the final year
3) Reducing ill-health and early retirement pensions.
Since 2003 staff have already seen their contributions rise from 5% to 9.29% a year, while the company's contributions have risen from 11.7% to 18.21%.