UK - BAE Systems says it plans to help plug its £2.4bn (€3.5bn) main pension fund deficit with £240m in property assets and £110m in cash.
Spokesman Richard Coltart explained a negative market reaction as a results-day reflex, but analysts such as JP Morgan’s Harry Breach described the size of the deficit as “a knock”.
According to Coltart, the reaction reflects the fact that trustees have yet to vote on a proposal that would share liability for the pension shortfall between BAE (60%) and its workforce (40%). The trustees’ decision is expected within weeks.
Meanwhile, both the firm and trade union Amicus hailed the deal as a “probable” model for future agreements – including those covering BAE’s smaller Royal Ordnance and Marconi pension funds. An earlier employee poll found 88% in favour of the main pension fund deal.
The property assets used to plug the gap will largely be in the office sector. They will not include industrial and specialised real estate.
“We had to address the actuarial deficit,” said Coltart. “We’ve got a lot of property – and it’s good.”
“Addressing pension deficits is a challenge,” BAE said in a statement. “Reduced discount rates used to value scheme liabilities and the need to address changes in assumptions for increased life-expectancy combined to create a significant deficit in the funding of the company's pension schemes.”
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