BA and M&S race to insure staff on pension funds

British Airways and M&S pension schemes write to tens of thousands of members to reassure them pension funds are safe after market turmoil

British Airways and Marks & Spencer pension schemes have written to tens of thousands of members to reassure them of the security of their pension funds after recent market turmoil.

The administrators of the two defined benefit pension plans are seeking to reassure current and former staff following the chaos in the bond markets. A fall in the price of British government bonds – known as gilts – has left some final salary pension funds scrambling for cash.

Indeed, in some cases, gilts have been used as collateral for so-called leveraged investment (LDI) strategies used by funds to “hedge” against inflation risks. The crisis prompted the Bank of England to step in with a £65billion pledge to buy gilts – and prevent a “fire sale” that would have made the selloff worse.

Turbulence: BA has two pension schemes with 83,000 members and assets totaling around £25billion

Without the bailout, some employers or pension fund sponsors might have been liable for making up for losses, according to a letter from Charles Counsell, chief executive of The Pensions Regulator, to MPs this week.

BA has two pension schemes with 83,000 members and assets totaling around £25bn.

The trustees told members that – “unlike other pension funds” – they had not been “negatively affected by recent market volatility”.

The larger of the two funds, the New Airways Pension Scheme with 62,000 members and assets of around £18bn, uses LDIs.

But members were told leverage – the scale of loans relative to assets held – was low and no cash was needed to fund “derivative” positions – potentially risky financial bets.

The Mail on Sunday has contacted a number of large employers to assess the impact of volatility on their pension funds.

M&S had no comment. But it is understood the company has not had to take any action and has been able to reassure members that recent market moves have not affected the scheme’s funding position.

Tesco said: “Like many pension schemes, we are closely monitoring and managing the impact of recent market volatility.

“Our pension plan remains in a strong position. The regime did not ask for help from the corporate sponsor.

“It’s a testament to the long-term approach to pension risk management that has been taken for many years.”

BT, British Gas owner Centrica, oil giant Shell, education publisher Pearson, software company Sage and Sainsbury’s declined to comment.

BP did not respond to requests for comment.

Advertising