BAE estimates GMP cost at £114m as pension deficit falls

BAE Systems has estimated that the recent High Court ruling on guaranteed minimum pension (GMP) equalisation will increase its pension costs by £114m.

In its Preliminary Announcement 2018, BAE revealed that £110m was “in respect to the group's subsidiaries” and the remaining £4m was for “the group's share of MBDA's allocation”.

The announcement also showed that its pre-tax accounting net pension deficit decreased by £100m to £3,900m between 31 December 2017 and 31 December 2018.

Its pension assets totalled £1,444m, as of 31 December 2018, while the company's pension liabilities totalled £6,330m.

BAE has a total of nine UK defined benefit pension schemes which are valued every three years, following an agreement with The Pensions Regulator.

During 2018, BAE contributions to its pension schemes totalled £554m, up from £433m in 2017, of which £211m was deficit recovery payments to its UK schemes.

BAE expected that contributions to its UK pension schemes in 2019 will be “broadly in line” with its contributions in 2018.

Commenting on the report, BAE chief executive, Charles Woodburn said: "The group made good progress in strengthening the outlook and geographic base of the business, with a number of significant contract wins.

“The defence order backlog is now at a record high with visibility on many of our key programmes through the next decade. Delivering a strong operational performance and continued investment will enable us to meet our growth expectations and underpin the long term."

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