BT in court to clarify pension scheme guarantee

The Trustee of the BT Pension Scheme has started court proceedings at the High Court in London to clarify the terms and scope of the Crown Guarantee governing the company’s pension scheme.

When BT was privatised in 1984, the government provided a Crown Guarantee which said that it would support BT’s pension obligations to the BT Pension Scheme if the company were to become bankrupt.

The Trustee claims it has found it difficult to obtain the clarification despite trying to do so for several years, which has led to this legal case. The High Court is expected to give its decision in October 2010.

The BT Pension Scheme, a final salary scheme, closed to new members in April 2001. It would only come into effect if BT were to become insolvent.

Although BT is a defendant in the case, alongside the government, the company said that this is “only as a technicality”, and that it supports the Trustee's aim of seeking clarification on the Crown Guarantee.

BT insisted the case was "purely a technical legal case", adding that it "welcomes" the hearings. “BT has a binding commitment with the BT Pension Scheme to pay £525 million a year deficit repair payments and this remains the case," it said. "Any comments about the impact of the court ruling on future payments is pure speculation.”

In February, BT and the Trustee announced an agreement about how it would pay off the pension deficit, which stood at £9 billion as of 31 December 2008, over a 17-year period. Under the current plans, BT will make payments of £525 million each year for the first three years of the repayment period, which will increase to £583 million in the fourth year. It will then increase payments by three percent each year until the seventeenth year.

BT last week managed to strike a deal with the Communication Workers Union, averting a pay strike. In a new 39-month offer, staff will get a three percent pay rise each financial year from April 2010 to March 2013, with the rise being backdated to January.

Copyright © 2010 IDG Communications, Inc.

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