Maximise your Avios, air miles and hotel points

British Airways to defer £450 million in pension plan payments to preserve cash

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

In advance of IAG’s full-year results, due later this week, British Airways made two announcements yesterday about its plans to generate liquidity.

A pension scheme with a little airline attached ….

British Airways is occasionally described as a pension scheme which happens to own a small airline. This is not far from the truth.

New Airways Pension Scheme deficit

The last published valuation of the New Airways Pension Scheme (NAPS), at 31st March 2019, showed that it had assets of £18.1 billion. The market capitalisation of IAG is currently £8.4 billion, of which BA accounts for around half. There is some truth in the remark.

The New Airways Pension Scheme, which has been closed to new members since 2003, has a funding hole of around £2 billion. British Airways has been working hard to fill this gap in recent years.

BA will defer £450 million of deficit contributions

British Airways has agreed with NAPS to take a 12-month break from making ‘deficit contributions’.

This has been backdated to October 2020 and will continue to September 2021. There is a cash saving to BA of £37.5 million per month, for a total saving of £450 million.

Under the current plan, BA will resume regular ‘deficit contributions’ from October 2021. The size of these payments will depend on the triennial valuation of the scheme due on 31st March 2021.

However, it will not start to repay the missing £450 million until March 2023. From that point, any dividends paid upstream from BA to its parent IAG must be matched by a deficit reduction payment. These will continue until the £450 million, plus interest, is repaid.

BA has put up various property assets as security in the event that the airline fails before the payments can be made.

British Airways 787

BA is drawing down its £2 billion Government-guaranteed loan

As we covered here on New Years Day, British Airways has agreed a 5-year Government-guaranteed loan worth £2.0 billion.

This is funded via the Export Development Guarantee scheme. The money is provided by commercial banks but the loans are underwritten by the Government to, based on precedent, 80% of the total sum.

British Airways confirmed yesterday that it now needs this money, and will be drawing down the loan before the end of the month.

Conclusion

The good news for British Airways is that, in the short term, liquidity does not seem to be a problem. We should find out from the IAG financial results on Friday how long this £2.45 billion will last.

The hope is that it will see the airline through until passengers have confidence to start booking again. Remember that, if the airline fails, the majority of the £2 billion pension deficit will be picked up by taxpayers, as will 80% of this new £2 billion loan.

You can find out more on the IAG website here.


HFP-Barclaycard-Avios-Card

How to earn Avios from UK credit cards (December 2022)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

25,000 Avios for signing up and an upgrade voucher for spending £10,000 Read our full review

Barclaycard Avios card

Barclaycard Avios Mastercard

5,000 Avios for signing up and an upgrade voucher for spending £20,000 Read our full review

There are two official British Airways American Express cards with attractive sign-up bonuses:

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

British Airways American Express

5,000 Avios for signing up and an Economy 2-4-1 voucher for spending £12,000 Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points.

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & four airport lounge passes Read our full review

The Platinum Card from American Express

30,000 points and unbeatable travel benefits – for a fee Read our full review

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 10,500 Avios.

Capital On Tap Business Rewards Visa

10,500 points bonus – the most generous Avios Visa for a limited company Read our full review

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 30,000 Avios sign-up bonus.

British Airways Accelerating Business American Express

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

There are also generous bonuses on the two American Express Business cards, with the points converting at 1:1 into Avios. These cards are open to sole traders as well as limited companies.

American Express Business Platinum

40,000 points sign-up bonus and a £200 Amex Travel credit every year Read our full review

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

Comments (24)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Lord Doncaster says:

    I suppose it’s also rare these days for new pensions to be inheritable by your surviving partner?

  • Kevin D says:

    As we’re on the pension stories in this thread, ‘m a doctor, and have had to work a lot of extra hours on the front line in ED during the pandemic. I’ve just found out today that I’m going to be hit with a big HMRC bill as I’ve crossed an earnings threshold with regards to my pension. Absolutely gutted. So its essentially cost me money to go to work on every extra shift during this pandemic. Whats worse, I probably won’t live to see my pension as I’ve a genetic condition with 10 years less life expectancy than the average person! So although my NHS pension will never be on the line, it just shows how messed up this country is!

This article is closed to new comments. Feel free to ask your question in the HfP forums.

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.