BA ditches final salary scheme
British Airways has become the latest UK public company to ditch its final salary scheme for all new employees.
The company said it was moving from a defined benefit final salary scheme to a defined contribution basis from the autumn, placing the risk of poor performance from investments at the feet of employees rather than the company.
The decision will not affect the pension benefits of the 101,000 members of its two existing schemes.
BA is just one of many of the UK’s largest employers to end its final salary scheme, many of them blaming their decision on the controversial new pensions accounting rule, FRS 17.
The new standard requires companies to book pension fund deficits on their balance sheets. Under FRS 17, BA’s pensions schemes showed a shortfall of £394m at 31 March this year.
John Rishton, BA’s chief financial officer, said: ‘The change to a defined contribution pension arrangement for future new UK staff is a measured and necessary response to the competitive environment in which British Airways operates.’
BA said the new accounting standard, as well as rising life expectancy and volatile markets all led to the company’s decision to end their scheme.