In a bid to clear the GBP1 billion deficit in its pension fund British Airways has proposed raising the retirement age of its staff and making a GBP500 million payment into its pension pot.

The airline said it plans to keep a final salary pension scheme with no changes to pension benefits already earned and no increase in staff contribution rates.

Other key changes that the airline has proposed include a slower accrual rate for employees, pensionable pay increases no more than inflation, and for pension increases on retirement to be capped at 2.5% each year.

In addition to the contribution the airline would make to the fund, British Airways’ chief executive Willie Walsh said the changes to members’ future benefits would further reduce the anticipated deficit by GBP450 million.

Mr Walsh commented: These changes are necessary to clear the past deficit and to contain the amount of future funding needed. It means working longer to get a similar annual pension, but one that is more secure. This should address the pension problem at British Airways once and for all.