According to UK defence manufacturer BAE Systems’ annual results yesterday, its pension deficit doubled last year to £3 billion, half its stated assets of £6.14 billion. But this figure is misleading for both shareholders and employees.
Nothing changed last year in the way BAE funded its pension plan. In fact, the amount employees contribute rose from around 3% to 5%. But two adjustments to the way the pension deficit is calculated added £1.5 billion.
An actuarial analysis of employee longevity that takes place every ten years increased the average pension period for a retiree at 65 from 16 to 19 years, adding £800 million to the deficit.
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