BAE Systems has agreed a plan with its unions to wipe out its huge pension fund deficit.
The aerospace and weapons company will pay in an extra £1.1bn over the next 10 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 are also paying higher regular contributions.
Although the scheme will provide reduced benefits in the future it will be kept open for current members.
To save £770m, other changes have been agreed:
- A formula will be used to reduce the expected pension if longevity improves further, but
- Staff will be allowed to work beyond 65 to offset the reduction
- Pension calculations will be made on the average pay earned in the final three years at work, not just the final year
- Ill-health and early retirement pensions will be reduced.