British Airways Closes Pension Plans

Closes one pension to future accruals and another to future contributions.

British Airways has closed two of its pension funds to future accruals and contributions, effective March 31. The airline closed its New Airways Pension Scheme (NAPS) to future accrual, and its British Airways Retirement Plan to future contributions, and has replaced them both with the British Airways Pension Plan, a defined contribution pension plan.

International Airlines Group, the parent company of British Airways, said the annual costs for British Airways Pension Plan are expected to be approximately £80 million ($112.5 million) lower than the equivalent NAPS and British Airways Retirement Plan costs were in 2017. IAG also said the most recent full actuarial valuation for NAPS will reflect the closure to future accrual.

“This is an important step in managing the risk in NAPS and ensuring the airline has an appropriate cost-base for the future,” Steve Gunning, British Airways’ chief financial officer, said in a release. “The new arrangements include a market-competitive defined contribution scheme and will stop the build-up of further liabilities and risk in NAPS. This will help to improve the security of existing benefits.”

The new plan offers a choice of contribution rates, and the ability to opt for cash instead of a pension. Following the closures, members’ deferred pensions will be increased annually by inflation up to 5% per year as measured by the CPI, which is typically lower than the previous assumption for pay growth, which included pay increases and promotions.

British Airways currently makes deficit contributions to NAPS of £300 million each year, as well as up to an additional £150 million yearly, depending on its cash balance.

As part of the closure of NAPS, the airline agreed to make certain additional transition payments to NAPS members, if the deficit had reduced more than expected at either the 2018 or 2021 valuations.

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PR Gov. Rossello to Present Rogue Fiscal Plan Thursday

Proposal will defy board-requested revisions to PR pension system in favor of governor’s original concepts.

Puerto Rico Gov. Ricardo Rossello plans to submit a fiscal plan Thursday tailored to his own specifications, rebuking demands from a federally appointed board that is overseeing the island’s financial troubles.

Rossello sent a seven-page letter of defiance to the board on Sunday, announcing his plan will not contain any of the layoffs, pension cuts, or labor reforms the board called for as a means to help aid the island’s ailing pension system.

“The government will not allow the takeover of these powers, and therefore cannot be compelled to implement many of the suggested revisions,” he said in the letter, emphasizing that the statute that establishes the board’s fiscal plan certifications also states that it cannot usurp the powers of Puerto Rico’s government.

Rossello’s relationship with the board has been a rocky one. Just last week, he rescinded his fiscal proposal after the board demanded a 10% pension reduction and the additional measures, calling the oversight board’s actions “illegal” as well as “unfair and abusive.”

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“The government opposes these additional measures to reduce pensions because they impose a disproportionate burden on the workers and retirees of Puerto Rico,” Rossello said in the letter, adding that the government believes that the revisions would “significantly depress” economic growth for the island.

However, the board can choose to impose a unilateral fiscal turnaround if Rossello’s defiance continues.

Puerto Rico is in the midst of a debt crisis—the largest bankruptcy in US history. In addition to a $120 billion bond and pension deficit, Puerto Rico is still recovering from the effects of Hurricane Maria. Currently 16% of the population is still without power.

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