14 June 2006
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%.
