Trustees of the British Airways pension fund have reportedly been persuaded to release bank guarantees of £330million to the ailing company should it need the funds.

A statement released by the trustees on financial guarantees says that following advice, they have agreed to surrender the £230million guarantee available to the Airways Pension Scheme (APS) and the £100million guarantee available to the New Airways Pension Scheme (NAPS) to British Airways should they request it.

The statement said the existing APS guarantee would be replaced with alternative security. The Trustees are reportedly satisfied with the agreement as their see it will 'serve to improve the financial position and prospects of the Company with a view to meeting its obligations to the Scheme'.

It is not, consultant actuaries Punter Southall says, clear whether the trustees have been offered anything in return for this agreement. "Had BA gone insolvent with a big enough deficit in the scheme the guarantee would have benefited the PPF rather than members," commented Danny Vassiliades, principal and head of corporate advice. "This may have been a consideration for the Trustees in choosing to give it up."

However, other industry commentators are concerned that this choice to surrender pension guarantees could have the adverse effect of starting a trend. David Trenner, technical director at Intelligent Pensions, said: "What the trustees are effectively saying is that if the company goes under, the PPF can pick up the tab. But the PPF is funded by other pension schemes which cannot be expected to pay ever increasing levies to enable schemes like the BA scheme - a pension fund with a smaller company attached to it - to behave in such a cavalier manner."

Towers Perrin's Mark Duke, head of pensions, agreed: "As employers continue to be battered by the recession, we are likely to see more trustees making concessions in order to keep the company afloat. As the Pensions Regulator has recently pointed out, trustees face a challenging tightrope walk at the moment - trying to secure member benefits for the long term without jeopardising employers' solvency. Where companies are struggling it is vital that they sit down with trustees and negotiate solutions that provide protection for both members and the organisations themselves."

- Pensions Age July 2009

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