British Airways has offloaded £4.4bn in pension liabilities to an insurance company in a bid to cap its pension responsibilities.
Legal & General will effectively take over the liabilities for 22,000 British Airways pensioners in the largest deal of its kind in the UK.
The aim of the “bulk annuity” deal is to protect British Airways from higher pension costs in future, which could happen because of poor investment returns or unexpected increases in life expectancy.
For years, British Airways has struggled to shed its reputation as a company with a huge and costly pension scheme with an airline attached. Shares in its parent company, IAG, were up nearly 0.5% on Thursday morning, its first rise since a calamitous data breach sent shares diving last week.
The BA pensioners affected are in the Airways Pension Scheme (APS) which, according to the 2017 annual report, had total liabilities of £7.7bn.
Virginia Holmes, chair of the trustee board for APS, said the deal would reduce risk and increase security for members.
“Today’s announcement is the culmination of much hard work undertaken over several months and we are pleased to be taking this step in the scheme’s de-risking journey,” she said.
The airline’s largest defined-benefit scheme, New Airways Pension Scheme, had liabilities of £19.8bn and a deficit of £3.7bn, according to that scheme’s annual report.
The BA deal is the latest in a string of bulk annuity transactions that have involved insurers take on partial responsibility for pensions at companies including EMI, Boots, Littlewoods, National Grid, M&S and WPP. Nigel Wilson, L&G chief executive, said further transactions are planned in the next few months to remove legacy liabilities.
“The second half of 2018 is likely to be a record six months for our PRT [pensions risk transfer] business,” he said.
The BA deal comes as the airline continues to battle with the fallout from the theft of 380,000 customers’ details by hackers last week. Cyber security firm RiskIQ said it had found 22 lines of code injected in the BA website by the hacker group Magecart which could have been the cause of the breach, and which was similar to the attack on Ticketmaster’s website earlier this year.
Class action law firms are seeking BA customers affected by the breach, saying they could be in line for up to £1,250 in compensation even if they have not suffered a direct financial loss.
Your Lawyers, a consumer rights law firm, says the compensation would be for the distress BA customers may have experienced. “Crucially, this is on top of any compensation customers may receive from British Airways as a result of stolen money,” it said.
Your Lawyers is collaborating with SPG, the British arm of a US law firm, to launch a no-win, no-fee case against the airline that, according to reports, could seek payouts of up to £500m.
