British Airways Launches Legal Action Against Pension Trustees

Airline giant British Airways has launched legal action against the trustees of one of its pension schemes.

The company, which is owned by the International Airlines Group, is taking on the trustees of BA's APS pension scheme in the hope of stopping increases in payments.

Around 29,000 current and former BA employees are under the scheme, which had its annual inflation-linked increases switched from retail price index to the consumer price index measure in 2011.

The change was prompted by the government which called on the private sector defined benefit schemes to switch to the CPI measure.

The significance is that RPI generally gives a higher figure for inflation than CPI does.

The APS scheme, which was closed to new members in 1984, increased its payments to pensioners to 2.2% in April, but the scheme's trustees tabled an additional 0.2% hike for December.

The trustees said the move means £12m would be added to the annual payments made to retirees over the lifetime the scheme.

BA noted the APS scheme had a deficit of £680m ($1,111m, €811m) at its most recent evaluation, and claimed that means the existing benefits of APS members are "some way off being fully funded, even before the trustees' decision to increase those benefits above the level promised under the scheme rules".

In addition, the airline conceded the £12m increase is "relatively small", but stressed it is concerned it may set a precedent for further increases in the future.

"If allowed to stand, this decision can only add to the scheme's liabilities and make resolution of the deficit more difficult. We regret that the trustees have not heeded concerns expressed by both ourselves and the Pensions Regulator," a spokeswoman for BA said.

She added: "We do not believe the long-term security of members' benefits should be put at risk for the advantage of retirees who already enjoy more generous pensions than the vast majority of current employees can look forward to.

"In these circumstances, we are left with no alternative but to pursue legal action with the objective of preventing the additional increase going ahead."

Paul Spencer, chairman of the APS trustees, told the Financial Times they were "disappointed" BA was taking legal action.

But Spencer also said he remained convinced that they had acted in the "best interests of the scheme members".