The decision to close a defined benefit pension scheme will hit tens of thousands of hard-working people in the UK — and it may not be limited to the employees of British Airways.
On Thursday [today], British Airways (BA) announced plans to shut down future contributions to its New Airways Pension Scheme (NAPS). The decision hits more than 17,000 existing employees of the carrier.
BA’s decision to close the scheme to future accruals will mean that employees will not see their retirement payout increase in line with their salary and length of service.
BA said that the decision was made because NAPS’ (New Airways Pension Scheme) deficit had topped £3.7-billion by March this year and was, according to one newspaper report, “the largest of all UK company pension black holes relative to the firm’s overall value”.
A quick glance at the FTSE 100 companies with the largest pension liabilities reveals that it includes such behemoths as Royal Dutch Shell, BT, Lloyds Banking Group, Barclays Bank, BP, and HSBC, among others.
Unions and financial commentators said that BA’s move was a “disappointment” and “would create uncertainty”. Carrick Director of Retail Sales Mike Potts said the decision would have a huge impact on consumers who are in final salary and/or direct benefit schemes.
“The consumer does not want to hear the words ‘uncertainty and retirement income’ in the same sentence,” he said. “Add to that the fact that the pension liabilities of some seriously substantial UK companies are in deficit, and you have a lot of very worried consumers.”
Potts pointed out that the decision was not final and would be discussed between the unions and the airline in the coming weeks. “This is not the time for panic, but neither is it a time to be complacent,” he said. “It could happen in any of the other companies facing the same problem — increased life expectancy of members, record low interest rates, and low Government bond yields — and therefore a lot of consumers could be affected.”
He believes that consumers need to tackle this head on by getting professional advice. “Carrick is the leading expert in creating sustainable retirement solutions,” he said. “Coupled with the fact that 2017 has seen some of the largest increases in transfer values in recent years, now is an ideal opportunity to re-assess your financial plan, and make sure you are not adversely affected by similar proposals.”
If you have a UK pension and would like to know more about your options, contact Mike today at [email protected]