Court throws out BT's plans to reduce pension rates

Back to drawing board on £14bn pensions deficit

BT Tower photo via Shutterstock

Plans by BT to cut its huge pension deficit have been thrown out by the High Court in England. The UK's incumbent telco had wanted to shift the rate used to calculate final salary pension payments.

In December 2017, the telco sought a decision from the High Court to change the index used to calculate pension increases paid in the future to members of Section C of the BT Pension Scheme (BTPS) from the Retail Price Index (RPI).

The proposed move to another index would have meant a cut in pension for 83,000 current and former staff who joined the company after it was privatised in 1984.

The BT scheme's other sections, "A" and "B", are for staff who joined the company before 1984. Those members are already on the Consumer Price Index (CPI) – which is usually around one percentage point lower than the RPI as an inflation measure.

In an investor update, BT said: "We are disappointed with the decision and will now consider the judgment in detail in order to decide next steps, including the possibility of an appeal."

BT has a total of 296,000 active and deferred members of its pension scheme. The firm is currently struggling to tackle its ballooning pensions deficit of around £14bn, up from £7bn just three years ago.

Andy Kerr, deputy general secretary of Telecoms and Financial Services at the Communications Workers Union, said: "We welcome the news that the uncertainty on this issue has been resolved, and that the Court has upheld the use of the RPI as the relevant index for pension increases in Section C of the BT Pension Scheme (BTPS).

"This is an important judgement that secures the current rights of scheme members."

BT is currently proposing to close its defined benefit pension scheme for 11,000 managers and slash contributions to its 21,000 frontline staff. The employee consultation closed this week, with changes proposed to take place from April Fool's Day. ®

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