BA to take legal action over pensions scheme precedent

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British Airways has begun legal action against the trustees of one of its pension funds in a bid to prevent them forcing it to increase its annual contributions.

Airlines Pensions Scheme (APS) is one of three pension schemes used by the airline. It was closed to new members in 1984 when it was superseded by the New Airlines Pension Scheme (NAPS). There are 29,000 members, of whom all but 800 are either pensioners or deferred pensioners.

APS trustees want to increase BA's contribution by 0.2% or £12 million ($19.6 million) to bring it into line with the UK Consumer Price Index, but the airline says that while the amount "is relatively small", agreeing to it would "set a precedent for further increases in the future" and complicate efforts to tackle an existing £680 million deficit in the scheme.

The Airways Pension Scheme had a deficit of £680m at its most recent evaluation. This means that the existing benefits of APS members are some way off being fully funded, even before the trustees' decision to increase those benefits above the level promised under the scheme rules, says BA: "If allowed to stand, this decision can only add to the scheme’s liabilities and make resolution of the deficit more difficult. We regret that the trustees have not heeded concerns expressed by both ourselves and the pensions regulator."

APS says the 0.2% rise will now be put on hold until legal proceedings are concluded. Paul Spencer, chairman of the APS Trustees, says he is "disappointed" by BA’s decision to take legal action, but adds that the court’s judgement will clarify APS’s powers to adjust contributions.