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Proposed Changes to BT Pension Scheme

8 July 2008

CWU members in BT received notice on the 22 May 2008, that the Company intended to review the BT Pension Scheme (BTPS), the defined benefit scheme.

The Company’s reasons for wanting to conduct this review can be summarised as follows:

• BT is paying £300m per annum in employer pension contributions;
• The company has paid £2.5 billion in deficit contributions since 1999, including £840m in deficit contributions since 2006. It is also committed to further deficit payments of £280m per annum over the next seven years.

The company argues that it has the largest private sector pension liabilities in the UK, and that it believes these costs are too high and are unsustainable over the long term.

The reason the Company want to review the pension arrangements now, is because there is to be a triennial valuation of the scheme on 1 January 2009, following which the trustees of the scheme will agree a schedule of pension contributions and deficit payments with the employer. The Company anticipate that the valuation will show that the cost of providing the pension benefits will rise, two key reasons being:

1. Members of the pension scheme are living longer and therefore pensions will need to be paid for longer;
2. Returns on investments will be lower looking into the future than has been the case in the past.

So the Company want to determine changes that will reduce the pension costs and risks in time for the valuation. It wants these changes to be decided by the end of September 2008.

Before the company can implement changes it has to complete a statutory consultation exercise, with employees, which takes about 60 days. It is not bound by the outcome of this consultation exercise and when it has been completed, the company’s ability to unilaterally implement changes is significantly increased.

On receipt of BT’s notice that it wished to review the BTPS, the CWU immediately responded in writing asserting:

1. That the CWU would not accept closure of the BT Pension Scheme for existing members of the scheme.
2. That future pension benefits for existing members of that scheme must continue to be defined benefits and;
3. That the Company must increase the employer contribution rate to the new BT Retirement Plan (see below).

The Company responded by stating that it was not their intention to close the BT Pension Scheme.

The Executive was also unequivocal in making it clear that if the Company commenced a statutory consultation exercise without an agreed position with the CWU, the Executive would immediately commence a ballot for industrial action.

To date a definitive set of Company proposals for change has not been received but preliminary discussions have been held. Union negotiators have expressed to the company in no uncertain terms:

1. the strength of members feelings on this matter, and
2. the CWU intention to ballot for action if the Company seek to unilaterally move to a statutory consultation exercise.

BT Retirement Plan (BTRP)

Since 2001, all new employees recruited to BT have been provided with a new pension scheme, the BT Retirement Plan - which is a defined contribution scheme.

Under this scheme employees can choose to make an employee pension contribution on a sliding scale of 4 to 10% of pensionable pay, the contribution rate chosen is exactly matched by the employer.

There are some 18,000 members of this new scheme, at least 12,000 of whom are employed in CWU represented grades. CWU members typically choose to make a contribution of either 4 or 5% which is matched by an employer contribution of 4 or 5%.

The CWU has been actively pursuing a claim with BT over the last 18 months to secure an increase in the employer contribution such that it is double that paid by the employee. So for example, if the employee contributed 5% the employer would contribute 10%. The Company has consistently refused to improve this scheme.

The CWU will be having further urgent discussions with the Company. Members will be kept up to date with developments.