(Reuters) - British Airways has agreed to launch a new defined contribution pension scheme with flexible benefits, replacing another of the traditional defined benefit schemes which UK companies have steadily phased out in the past decade.
The new scheme will offer “market-competitive” arrangements with a choice of contribution rates and the ability to opt for cash instead of a pension, the airline’s parent company IAG said on Friday.
The scheme, to open on April 1, will replace the main UK defined benefit scheme, the New Airways Pension Scheme (NAPS), as well as its main UK defined contribution scheme, the British Airways Retirement Plan (BARP).
Active NAPS members will be offered a choice of transition arrangements including a cash lump sum, additional company pension contributions or additional pension benefits in NAPS prior to its closure.
The overall financial impact on British Airways will depend at least partly on the transition arrangements members select, IAG said.
The changes are aimed at addressing the rising cost of future pension provision and the volatility in the NAPS scheme which had a deficit of 2.8 billion pounds at its last valuation as of March 2015.
The next valuation will be as at March 31, 2018, but will now reflect the closure of the scheme to future accrual.
IAG shares were up 0.7 percent in early trading.
Reporting by Arathy S Nair in Bengaluru