International Airlines Group's subsidiary British Airways has closed its New Airways Pension Scheme (NAPS) to future accrual and its British Airways Retirement Plan (BARP) to future contributions from March 31, 2018.

The schemes have been replaced by a flexible benefits scheme, incorporating a new defined contribution pension scheme, called the British Airways Pension Plan (BAPP). It offers a choice of contribution rates and the ability to opt for cash instead of a pension.

NAPS active members were offered a choice of transition arrangements. The financial impact of these arrangements is as follows:

· Cash transition costs, paid either directly to members or into their pension accounts, of £169 million.
· Some members chose a non-cash option to increase their NAPS pensions prior to closure which led to an increase in the scheme's liabilities.
· However, the net impact of these non-cash options and the reduction in liabilities brought about by closure, due to different pay and pension growth assumptions, will be a reduction in IAS19 liabilities of £770 million.
· In Q1 2018, the net impact of cash transition payments, the liability reduction and BARP closure costs will be treated as an exceptional gain of £598 million.
· The reduction of IAS19 pension liabilities does not change the current recovery plan payments to NAPS, which were agreed in 2016 as part of the full actuarial valuation of the scheme.

The annual costs for BAPP are expected to be approximately £80 million lower than the equivalent NAPS and BARP costs in 2017.

The next full NAPS actuarial valuation is due as at March 31, 2018. It will reflect the closure to future accrual, as well as the normal detailed review of the circumstances at the valuation date, including financial and demographic assumptions.

Steve Gunning, British Airways' chief financial officer said: "This is an important step in managing the risk in NAPS and ensuring the airline has an appropriate cost-base for the future. The new arrangements include a market-competitive defined contribution scheme and will stop the build-up of further liabilities and risk in NAPS. This will help to improve the security of existing benefits."