British Airways is proposing to freeze the New Airways Pension Scheme, London, under new retirement arrangements for the aviation company.
The proposal forms part of a consultation that aims to address "the significant and growing funding deficit faced" by the £15.5 billion ($20.1 billion) pension fund, said a statement provided by a BA spokesman. The consultation will begin in the coming weeks, he added.
"The proposed changes would help protect the pension benefits NAPS members have already earned and improve the company's ability to invest in the customer experience," said the statement. The fund was closed to new entrants in 2003 and has about 17,000 participants. Since 2003, the airline "has pumped £3.5 billion into NAPS," but the deficit has been hit by low interest rates and increases in life expectancy, growing to £3.7 billion in March. "It is the largest of all U.K. company pension deficits relative to the company's overall financial value," said the statement.
The deficit has risen 32.1% vs. figures as of March 31, 2015.
The sponsoring employer advised employees that in October it would be consulting on future plans for retirement arrangements and has been looking at options with its trade unions.
BA has an agreement in place with NAPS trustees to contribute between £300 million and £450 million a year until 2027 to plug the deficit.
"If NAPS remained open to future accrual, the cost to the company of providing future benefits to NAPS members could rise to 45% of individual's pensionable pay in 2018 — more than four times the typical employer contribution of U.K. airlines," said the statement.