BAE Systems' UK pension scheme DRCs total £1.42bn in 2020

BAE Systems paid a total of £1.42bn in deficit recovery contributions (DRCs) into its UK pension schemes in 2020, up from £231m in 2019, its final results report has revealed.

The total included a one-off DRC of £1bn into its main UK pension scheme, as previously agreed with the Pensions Regulator (TPR), made in April 2020.

The firm had agreed to a new deficit recovery plan with TPR in February last year, after its 31 October 2019 valuation revealed a deficit of £1.9bn.

The plan included an advancement of £1bn in DRCs that were due under the 2017 triennial valuation deficit recovery plan between 2022 and 2026.

BAE also accelerated its annual scheme payment for 2021 and paid it into the scheme in December 2020.

“We made a £1bn one-off cash injection into the UK pension scheme to accelerate the deficit reduction and give increased certainty to all our stakeholders,” the report stated.

“From a business perspective, it is anticipated this will give us additional cash flow looking forward and therefore opportunities for further generation of shareholder value.”

The multinational arms, security, and aerospace company’s total UK net post-employment benefits IAS 19 deficit, as at 31 December 2020, stood at £4.36bn.

The firm was subject to a charge of £7m in relation to guaranteed minimum pension equalisation.

Commenting within the report, BAE Systems chief executive, Charles Woodburn, said: "Thanks to the outstanding efforts of our employees and close cooperation with our customers, suppliers and trades unions, we have delivered a strong set of results against a challenging backdrop of the global pandemic.

“Throughout 2020, we focused on keeping our people safe and supporting our communities, whilst continuing to deliver for our customers.

"In 2021, we will continue to drive operational performance, progress our sustainability agenda and invest in high-end discriminating technologies to meet our customers' priorities, which will ensure we are well positioned to grow the business and contribute to the economic prosperity of the countries in which we operate."

In October 2019, six of BAE’s nine UK pension schemes, including the two largest, were consolidated into a single scheme.

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