Pension funding arrangements

BAE SYSTEMS PLC 13 June 2006 BAE Systems completes revised UK pension funding arrangements 13 June 2006 BAE Systems has completed a programme of measures to address the £3.1bn funding deficits in its principal UK pension schemes. In the accounts published for the year ended 31 December 2005 the company had a total pre-tax pension deficit of £5.3bn, as defined under the IAS 19 accounting standard and £4.1bn net of allocations to equity accounted investments. The IAS 19 deficit of £5.3bn, was estimated to have reduced to circa £4.2bn as at the end of May 2006 on an unaudited basis. At the latest valuation dates the aggregate of deficits across the four principal UK schemes, prepared for the purpose of setting cash contributions, was £3.1bn. Addressing the funding deficit in these schemes has been achieved through a combination of measures shared between the company and employee scheme members. Annual contribution rates have been increased for both employees and the company. In addition, employees have agreed changes to benefits to reduce future liabilities and the company has agreed additional one-off contributions of cash and assets to the schemes. The revised funding arrangements include one-off contributions by the company totalling £1,087m comprising the transfer of assets and cash. £661m will be contributed in 2006 with the balance over 10 years. The cash contribution in 2006 will be £181m. The result of these changes is an affordable solution that retains the valuable and highly regarded defined benefit pension arrangements for those employees who were offered such terms when they joined the company. Commenting on the completion of the new funding arrangements Mike Turner, Chief Executive BAE Systems plc said: 'Pension scheme funding has been a challenge for the company but I am delighted that we have now completed these revised arrangements through the constructive approach of all concerned. We have worked in close consultation with our Employees, Trades Unions and Scheme Trustees to develop pension arrangements acceptable and affordable to both the company and its people.' Issued by: BAE Systems plc London Investor enquiries: 44 (0) 1252 383730 Media enquiries: 44 (0) 1252 384719 This information is provided by RNS The company news service from the London Stock Exchange

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