BAE agrees to bigger payments to recover £2.1bn pension decicit

BAE Systems has agreed to pay more into its pension schemes to recover a £2.1bn deficit by the year 2026.

The defence company said it would increase payments into the schemes from about £205m a year to £220m from 2018 with payments rising in line with group dividends. The annual payments will be reduced by about £50m in 2022 and are scheduled to end in 2026.

BAE said the £2.1bn deficit across its UK schemes at the end of March 2017 was broadly similar to the position at the last valuation in 2014. The next funding valuation and review of contingency plans is planned for 2020.

The company also set out changes to reporting under the IFRS 15 accounting standard, which takes effect on 1 January 2018. Revenue on most contracts with customers will be recognised earlier but some profit and revenue will be deferred.

For the year ending 31 December 2017 IFRS 15 would reduce underlying earning per share by about 1p and 2018 earnings will not be affected materially, BAE said. There will be no impact on the way BAE manages its contracts or the lifetime revenue and profitability of contracts.

BAE said: "The new standard […] requires the identification of performance obligations in contracts with customers and allocation of the total contractual value to each of the performance obligations identified. Revenue is recognised as each performance obligation is satisfied either at a point in time or over time."