BAA workers accept DB pension closure and 'world-class' DC pension scheme

BAA employees finally voted to accept the closure of their defined-benefit (DB) scheme to new members, after months of wrangling between BAA and the union Unite.

BAA employees finally voted to accept the closure of their defined-benefit (DB) scheme to new members, after months of wrangling between BAA and the union Unite. Seven out of every 10 of the 6,000 airport workers in Unite voted in a summer 2008 ballot to accept the negotiated deal, which includes protection for 12 years for existing members of the final-salary plan and the introduction of a defined-contribution (DC) scheme with a high level of benefits.

'World-class' DC arrangement

For the DB scheme, a six-year “no-change guarantee” has been established – with a further six-year extended protection, providing the deficit does not exceed £250 million. New employees will automatically be enrolled into the newly negotiated DC arrangement, receiving an employer contribution of 10% of pensionable pay, matching a 5% employee contribution. However, members can opt to contribute 3% – to be matched with an 8% employer rate – or 8%, matched by the company at 12%.

DC scheme members who are not employed in the company’s fire service, will be entitled to an ill-health arrangement of two years’ continued employment with 50% pay, and then a payment on termination of three times annual basic pay. This is provided that they satisfy the criteria that would apply currently at BAA for partial ill-health, or total incapacity. Fire-service employees receive further, enhanced benefits including early retirement provision. Death-in-service benefits for DC members are to be paid at eight times annual basic pay.

A spokesperson for BAA says: “Following meaningful consultation with the trade unions we are pleased that agreement has been reached. We believe that the changes to BAA’s pension scheme will provide greater certainty for existing members, and that the defined-contribution scheme for new employees is among the most competitive offered by any UK company.”

Tough choice

Commenting on the recent agreement, Steve Turner, Unite’s national secretary for aviation, said: “The company is clearly in some difficulty following its sale to Spanish group Ferrovial, which, coupled with the continuous, unwarranted attacks on its operation of seven of the UK’s major airports, and the impact of the credit crunch, is playing havoc with its refinancing plans.

“The closure of the final-salary scheme to new employees is a bitter pill to swallow and a move we fought hard to prevent. A clear majority of our members accept, however, that these changes provide the best basis for pension security long into the future, while offering a decent replacement to those joining the company now.”