iNVEZZ.com, Saturday 31 May: BAE Systems Plc (LON:BA) CEO Ian King has warned of the impact that Scotland’s independence could have on workers’ pensions, The Telegraph reported. King’s statement is the second time the FTSE 100 defence company has expressed concern about a possible yes vote, following a warning from the head of Diageo (LON:DGE) earlier this week that changes in tax rules and currency uncertainty could harm Scotland’s whisky distillers.
BAE’s share price rose 0.19 per cent to close at 423.10 pence in London yesterday.
**Potential threat to pensions**
The Telegraph yesterday quoted BAE’s Ian King, who wrote in an internal blog to employees that if Scotland became independent and then joined the European Union, the company’s pension schemes would “possibly be included in EU regulations on cross-border pensions”.
“The reality today is that we cannot say how our pension systems would be affected,” King wrote. “There would be a range of possible outcomes”.
In November last year, the National Association of Pension Funds (NAPF) warned in a report that all cross-border schemes operating in the EU must be “fully funded at all times”. The Telegraph notes that BAE has a total pension deficit of £3.5 billion, even though it is spread across several schemes.
A BAE spokesman told the newspaper that the company has long-term plans to cover the deficit, agreed by the scheme’s trustees and regulator, and added that if the deficit is affected by cross-border regulations, not all £3.5 billion will need to be replenished.
King’s pension commentary is not the first time BAE Systems, which operates Scotland’s largest military shipyard in Glasgow, has intervened in the independence debate. In March, the company said in its annual report that the continuation of union between Scotland and the rest of the UK offered “greater security and stability” for BAE’s operations. (BAE share price: defence company warns of risks to Scotland’s independence)
**Latest Commentary on Independence**
Ivan Menezes, the head of the world’s largest producer of Scotch whisky, also expressed his independence concerns this week, focusing on the impact of Scotland’s withdrawal from the EU. (Diageo share price: CEO warns that Scotland will leave the EU)
Other FTSE 100 companies, including Lloyds Banking Group (LON:LLOY) and BP (LON:BP), have also warned of the risks associated with Scottish independence, while Standard Life (LON:SL) pension fund said it would consider relocating operations south of the border if it voted yes. (Standard Life share price: company ready to leave Scotland if necessary)
In contrast, British Sky Broadcasting Group Plc (LON:BSY) signalled last month that it would remain in Scotland regardless of the outcome of the referendum in September. (BSkyB’s share price: ) Willie Walsh, Chief Executive Officer of British Airways’ owner International Consolidated Airlines Group Plc (LON:IAG), said earlier this year that an independent Scotland could be a positive development for the company given the Scottish government’s promise to reduce and possibly abolish air passenger charges.
**Analysts about BAE Systems**
The 18 analysts who offer 12-month price targets for BAE Systems for the Financial Times have an average price target ofp 435.00, with a high estimate ofp 510.00 and a low estimate ofp 350.00. As of May 23rd, the consensus forecast of the 33 investment analysts surveyed who are monitoring the stock advises investors to maintain their position in the FTSE 100 defence company.
**Buy BAE shares at 423.90p on May 30th **.
**Sell BAE shares at 423.60 pence on May 30th **.