BMI pension scheme members face changes to benefits

Some members of British Midland Airways’, commonly known as BMI, defined benefit (DB) pension scheme could see cuts to their benefits after parent airline Lufthansa sells it to the International Airlines Group this week.

The trustees of the British Midland Airways’ pensions and life assurance scheme and Lufthansa have reached an agreement on future pension provision. The scheme will become part of the Pension Protection Fund (PPF), which will cover a level of pension payments.

In addition, the trustees and Lufthansa have agreed to make top-up payments to be provided by a separate section of the scheme, which will not be part of the PPF. Lufthansa will make a voluntary payment of £84 million, which will compensate the bulk of losses for most members of the scheme. These losses arise due to differences between the expected pension payments and those paid by the PPF.

Clive Grimley, chairman of the trustees of the British Midland Airways’ scheme, said: “Given the high pension deficit and the financial difficulties of BMI, the scheme had been at risk of joining the PPF without any top-up payment.

“In these very difficult circumstances, we very much appreciate the voluntary payment of £84 million by Lufthansa, which will make a positive impact on the benefits for many of our members.”

Lufthansa has informed the trustees that the funds should be distributed according to individual members’ characteristics, taking into account levels of pension and length of pensionable service. Lufthansa will retain no further balance sheet liabilities for the scheme.

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