British Airways PLC, London, today announced it will close its £10 billion ($14.6 billion) pension plan to new members, citing the controversial FRS 17 accounting standard as a key reason for the decision. Also cited were future losses expected due to rising life expectancy and volatile markets.
Executives from the airline will meet with defined benefit plan trustees May 22 to discuss proposals for starting a defined contribution plan for new members. "The change to a defined contribution pension arrangement for future new U.K. staff is a measured and necessary response to the competitive environment in which British Airways operates, John Rishton, CFO, said in a statement issued today.
The airline said under FRS 17, the plan would generate a company accounting shortfall of £394 million as of March 31. The British pensions industry has lobbied against FRS 17, which does not allow companies to smooth reporting of pension surpluses or deficits over the life of the pension plan. The accounting standard will become effective in June.