International Cons Airlines Group British Airways NAPS triennial valuation (8753J)
15 Diciembre 2022 - 11:40AM
UK Regulatory
TIDMIAG
RNS Number : 8753J
International Cons Airlines Group
15 December 2022
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
British Airways New Airways Pension Scheme triennial valuation
and deficit contributions
International Airlines Group (IAG)'s subsidiary British Airways
announces that it has signed an agreement with the Trustee of its
New Airways Pension Scheme (NAPS) on the scheme's regular triennial
valuation.
The valuation, based on the scheme's funding position as of 31
March 2021, shows an agreed technical provisions deficit of GBP1.65
billion compared to a deficit of GBP2.4 billion as of 31 March
2018. The 2021 valuation agreement supersedes the deferral
agreement signed in 2021 relating to the deferral of contributions
of GBP450 million that were previously due between October 2020 and
September 2021.
The reduction in the deficit between 2018 and 2021 has been
mainly as a result of British Airways' contributions of GBP1.3
billion between April 2018 and September 2020 and the
outperformance of asset returns over the previous discount rate,
partly offset by the impact of the UK Government's reform of its
RPI inflation measure, aligning it with CPIH from 2030.
Since 31 March 2021, the funding level of the scheme has
considerably improved to the extent that NAPS was in surplus on the
same basis as the 2021 valuation and remains in surplus as of 6
December 2022. This improvement in funding has arisen in large part
due to the increase in UK government bond yields, which has
increased the discount rate applied to pension liabilities,
combined with positive relative returns from the scheme's asset
portfolio. Due to an existing overfunding protection mechanism that
remains in place, British Airways is not expecting to be required
to make contributions to NAPS for the foreseeable future.
The main terms of the agreement are:
- A technical provisions deficit of GBP1.65 billion;
- The overpayment protection mechanism that was agreed at the
time of the 2018 valuation has been amended as part of this
agreement, whereby monthly deficit contributions will be suspended
if the funding ratio on a technical provisions basis, which is
tested each month, reaches 100 per cent or more;
- As a result of the overpayment protection mechanism, British
Airways does not expect to make any contributions because of the
funding ratio being over 100 per cent;
- Should the funding ratio fall below 100 per cent, British
Airways must begin making monthly contributions until funding
returns to at least 100 per cent;
- The schedule of these contributions, should the funding ratio
be lower than 100 per cent, are a rate of GBP50 million per year up
to June 2023 and increasing by GBP50 million each year up to June
2026 and then capped at GBP225 million per year from July 2026
until June 2032;
- British Airways will not pay a dividend in 2022 and 2023 and
there will be a 50 per cent matching contribution to NAPS if any
dividend is paid in 2024; dividend is limited to 50 per cent of
pre-exceptional profit after tax in 2025 and dividends exceeding
this would require additional payments to NAPS if the scheme is not
at least 100 per cent funded;
- In order to pay a dividend, British Airways must maintain a
minimum cash level of GBP1.6 billion after any dividend and
matching contribution have been paid;
- All dividend restrictions cease from October 2025;
- There is an annual cap of GBP300 million total contributions,
including dividend matching contributions, in a calendar year;
- British Airways has agreed to provide property assets as
security, which will remain in place until the end of September
2028.
Nicholas Cadbury
Chief Financial Officer
15 December 2022
Notes to editors
British Airways has two principal funded defined benefit pension
schemes in the UK, the Airways Pension Scheme (APS) and the New
Airways Pension Scheme (NAPS). APS has been closed to new members
since 1984 but remains open to future accrual. NAPS has been closed
to new members since 2003 and closed to future accrual since 2018.
Employees who participated in NAPS and new joiners since 2003
participate in the British Airways Pension Plan (BAPP) defined
contribution scheme.
The triennial valuation for APS as of 31 March 2021 was
finalised on 28 June 2022 and resulted in a surplus of GBP295
million compared to a surplus of GBP599 million as of 31 March
2018. British Airways ceased paying deficit contribution to APS
from 2019.
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