Employment News
Press Speculation over BT Pension Scheme
5 May 2006
Members may have seen speculation in the press concerning the BT Pension Scheme (BTPS) and the Crown Guarantee.
BT is in discussion with the Department for Trade and Inductry (DTi) over the exact implications of Section 68 of the Telecommunications Act 1984 (as amended by the 2003 Communications Act). The Act states that when BT was privatised all liabilities were transferred to the new corporate entity with some exceptions. One of these exceptions was the liabilities of the final salary pension scheme that is now the BTPS. It is these liabilities which are underwritten by the Government and subject to the "Crown Guarantee".
The CWU remains committed to ensuring that the BTPS is properly funded and that it remains open for existing members. The Guarantee provides an additional safety net for certain BTPS active members as well as pensioners. The Guarantee would only apply if BT became insolvent and the BTPS was ever wound up and relates to pension liabilities for anyone who joined the Scheme before the 6 August 1984. The independent Actuary employed by the BTPS Trustees estimates that the Guarantee may cover about 75% of the current Scheme liabilities.
This issue has become the subject of debate at this time because of recent changes to the law. New pensions regulations state that legislative provisions on scheme funding do not apply to that part of pension schemes that are covered by such a Guarantee. The new Pensions Protection Fund (PPF), set up to provide protection of pension rights to members if a company goes bankrupt while its pension scheme is underfunded, does not cover the Guaranteed part because this is met by the Government.
Both BT and the Trustees are seeking full legal clarification of the impact of the Guarantee. Until this has been resolved the Trustees will be unable to complete the BTPS valuation that is currently underway as the Guarantee could have an impact on the amount of money BT is required to pay.
The last full triennial valuation at 31 December 2002 concluded that the BTPS was 91.6% funded; BT agreed to pay an additional £232M per annum over a 15 year period to eliminate the deficit, and also agreed to increase normal contributions from 11.6% to 12.2% of salaries from January 2003. This payment schedule will continue until the valuation is finalised.
BT has recently reaffirmed its commitment to the BTPS. The Chairman Sir Christopher Bland has stated on 24 April that "BT stands fully behind its pension promise to pensioners and members".
It should be noted that the Crown Guarantee has no implications for either the BT Retirement Plan or the Syntegra Ltd Flexible Pensions Plan.