BAE to pay 500 million pounds to offset its pension fund deficit

BAE to pay 500 million pounds to offset its pension fund deficit

	Published : Mon, 14 Nov 2005 11:50 By : Cedric Benson Print this Story

LONDON: Britain's aerospace group BAE Systems will infuse 500 million pounds into its pension fund to offset part of the fund's 2.8-billion-pound deficit. This will be part of a deal with employees' unions and the payment is expected to be in cash and assets, including property, according to sources.

It will also be the largest ever payment made to a tottering pension plan by a British company.

In return for this largesse, the employees will accept reduced benefits for some scheme members -- like a proposal to cut payouts to workers who take early retirement. However, existing pensioners would continue to enjoy the current level of benefits.

The company refused to comment on the deal, saying the negotiations are still on.
BAE is ranked second in the list of FTSE 100 companies behind British Airways in terms of pension deficits in relation to their stock-market value.

BAE had already agreed two years ago along with its employees to increase their respective contributions to the company’s pension schemes. Employees have increased their input from 5 per cent to 9.3 per cent, while the company upped its contribution from 11.7 per cent to 18.2 per cent of the wage bill. BAE has some 40,000 people on its rolls in the U.K.

Another company, Marconi, had earmarked 700 million pounds of the 1.2 billion pounds it received from the sale of its business to Ericsson to partly offset the gap in its pension scheme. Media group ITV has announced 300 million pounds and Kingfisher retail group 250 million pounds for their respective pension funds.

Analysts expect the levies payable by companies to the government's Pension Protection Fund, a safety net for pension plans of failed companies, to go up next year. This year, PPF received 300 million pounds and some experts are of the opinion that it could be of the order of 1 billion pounds next year.

Meanwhile, the government said it will contribute about 2 billion pounds to help reduce a shortfall in the Royal Mail's pension deficit. In addition, the government is considering a plan to give over 20 per cent of the business to Royal Mail staff and approve an investment programme of nearly 2 billion pounds to improve sorting systems.