UK - British Airways (BA) and Iberia have moved one step closer to a merger, after the Spanish airline's board of directors said it was satisfied with the recovery plan worked out between BA and its pension fund trustees.

Iberia has informed the Spanish securities market commission CNMV it will not exercise its right to cancel the deal, which was dependant on BA addressing its £3.7bn pension deficit.

The British carrier agreed a recovery plan with trustees of its two pension schemes, the New Airways Pension Scheme (NAPS) and the Airways Pension Scheme (APS), in late June and received permission from the UK Pensions Regulator soon after.

Under the terms of the recovery deal, BA will seek to address the deficit by paying annual contributions of £330m.

The payments, which will increase in line with inflation, will run until 2023 in the case of the APS, with payments to the NAPS ceasing three years later.

Additionally, approximately 20% of the APS pension liabilities will be covered by a recent £1.3bn buy-in deal with Rothesay Life.

Meanwhile, 11 pension schemes, including the £28bn (€33bn) Universities Superannuation Scheme, have voiced their support for the Stewardship Code for investors, saying that compliance could advert further regulation.

Under the code, unveiled by the Financial Reporting Council (FRC) in July, investors should disclose details of their voting policy and how votes are cast, as well as monitor the boards of those companies in which they own holdings.

Daniel Summerfield, co-head of responsible investment at USS, said the code would encourage investors to meet stewardship best practice.

"The onus is now on institutional investors to respond positively and constructively to the code if we want to avoid any further regulation in this area," he said.

Head of corporate governance at Railpen Frank Curtiss said the code and its enforcement by the Financial Services Authority gave pension schemes valuable selection and monitoring tools, which would assist in the "quest for long-term value".

"This is good for our end beneficiaries and our investee companies, and I encourage pension funds and other asset owners to rise to the challenge," he said.

In addition to Railpen and the USS, the letter's signatories include BT Pension Scheme Management, the BBC Pension Fund and the local government pension schemes for Lothian, Merseyside, Strathclyde, West Midlands and the Environment Agency, as well as the Northern Ireland Local Government Officers' Superannuation Committee.

In other news, Mercer has warned companies about not taking action over the changes to pension tax relief, which take effect in April next year.

More than a third of companies had not begun investigating the effects of the new guidelines, which Roger Breeden, a principal at the consultancy, said was concerning, as the rules would take effect in April next year.

"While the detail has yet to be ironed out, companies should be preparing," he said.

"Turnaround time following publication of the government's intentions will be very, very tight."

Breeden added: "Inaction is to be partially expected as the industry awaits direction from the government, but many companies are anticipating changes and using the opportunity to make wider changes to all elements of their pension schemes.

"These include introducing different benefit or contribution levels."

Half of companies surveyed also believe new pension tax relief proposals will affect more of their employees than the plans outlined by the previous government.

However, Mercer said respondents think the current plans, which include a reduction in the annual allowance to as little as £35,000, will also better than the earlier proposals.

Finally, 44% of employees said the quality of a company's pension scheme was important when considering a new job.

The Workplace Pensions Report, compiled by Scottish Widows, also found that while more than half of 50 year olds surveyed were in final salary schemes, while only 29% of workers under 30 were enrolled in defined benefit schemes.

The report also found that 63% of respondents would be less inclined to look for a new employee if their current one increased pension contributions.

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