British Airways hands over pension fund management to BlackRock

British Airways hands over the running of mammoth £21bn pension fund serving 85,000 members to US investment giant BlackRock

  • Transfer of management involves the Airways Pension Scheme 
  • It also encompasses the New Airways Pension Scheme which shut in 2018 

British Airways has handed over the running of its huge pension fund to US investment management giant BlackRock.

The BA corporate pension scheme has assets worth over £21.5billion, meaning the transfer is one of the biggest of its kind to an external investment manager.

The transfer of management to BlackRock involves the airline’s Airways Pension Scheme and New Airways Pension Scheme, two of the country’s largest corporate defined benefit pension schemes, that manage benefits for over 85,000 members and beneficiaries. 

Transfer: British Airways has handed over the management of its huge pension fund to US-based investing giant BlackRock

BA’s pensions were previously managed in-house by British Airways Pension Investment Management Ltd.

Chair of Trustee APS and NAPS Trustee Roger Maynard said: ‘Operating as our in-house investment manager, BAPIML has delivered excellent investment performance and stewardship of the schemes over many years. 

‘This agreement is the necessary next step in the evolution of the schemes as they look to enhance their respective investment strategies, working toward their funding goals.

‘In BlackRock, we have identified an asset manager that will ensure the continued focus on delivering enhanced oversight, investment management and long-term value for the Schemes in the interests of our members. We look forward to working with BlackRock in the years ahead.’

Earlier this year BA owner IAG struck a deal with one of its pension funds to defer £450million of pension deficit contributions to save cash until the airline can start flying again at full capacity.

The agreement with the New Airways Pension Scheme means BA will defer monthly contributions of £37.5million due between October 2020 and September 2021 until March 2023.

Under the deal, BA will pay interest on the deferred cash and put property assets as a security, which will remain in place until the airline has repaid the pension contributions.  

It is seeking to plug a £2.6billion deficit, which was discovered back in 2018.  BA has paid £1.34billion in contributions to the New Airways Pension Scheme since March 2018, when it closed it down, moving its employees on to a new, less generous fund. 

The New Airways Pension Scheme was a final-salary plan, which guaranteed workers would be paid a proportion of what their salary was in the year before they retired. 

New management: The transfer of management to BlackRock involves the airline's Airways Pension Scheme and New Airways Pension Scheme

New management: The transfer of management to BlackRock involves the airline’s Airways Pension Scheme and New Airways Pension Scheme

In 2020 BA was one of several major employers to use emergency powers to stop members ditching their defined benefit pensions during the height of the crisis. 

BlackRock said today: ‘The size and scale of the partnership marks a seminal moment in the UK pensions industry. 

‘In recent years, regulation has intensified, operational costs have risen, and investment complexity has increased. 

‘As a result, many UK pension schemes are looking externally for investment management capabilities with the scale and resources to take on the challenges.’

The transition of assets completed on 1 June.  

BA slumped to a £3.9billion operating loss in 2020, which is more than half of the airlines group’s total loss for the year.

According to the FTSE 100 firm’s annual reports, BA’s loss dwarfed that of its stablemates Aer Lingus, Iberia and Vueling.

Shares in IAG are up 0.85 per cent or 1.75p to 208.75p at present. A year ago the share price was 170.82p.