BA defends closure of its final salary scheme

British Airways has defended the closure of its final pension salary scheme
to new employees, claiming it was too costly to retain.

From autumn 2002, the pension will change from a defined benefit final
salary scheme to a defined contribution scheme.

The company, which last week announced full-year pre-tax losses of £200m, is
the latest in a list of major companies which have changed their schemes.

BA said the decision follows an internal review of its UK pension
arrangements, taking into account the changing competitive environment, the new
FRS17 accounting rules, volatile markets and rising life expectancy.

John Rishton, BA’s chief financial officer, said: "The change to a
defined contribution pension arrangement for future UK staff is a measured and
necessary response to the competitive environment in which BA operates. It does
not affect the pensions of existing (scheme) members."

However pilot’s union Balpa has attacked the move, and said the change could
adversely affect recruitment and retention.

Balpa general secretary Christopher Darke said: "BA’s final salary
scheme has been instrumental in retaining qualified flight crew, achieving a
return on its investment in quality training."

Darke believes that improving terms and conditions on offer by other UK
airlines will mean BA is likely to experience greater staff turnover as a

The union is particularly concerned with the current cadet entry pilots, who
have yet to join the company, but who entered into a training contract with the
expectation they would be able to join the current scheme.

● In a separate dispute ruled on by the Court of Appeal last week,
trustees of BA’s Airways Pension Scheme were ordered to distribute a £850m
surplus to BA pensioners. The judges ruled the trustees could not pay out any
of the surplus to BA, overturning an earlier decision in the High Court.

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