The Communications Workers’ Union (CWU) has warned BT that it will “use all means up to and including industrial action” if the UK telecoms giant pushes forward with any plan to close the company’s “gold-plated” defined-benefits pension scheme, which could be suffering under a £14bn deficit.
A major strike of vital Openreach engineers and other key staff is currently something that BT would obviously wish to avoid, not least because they’re now in the process of rolling out the next generation of “ultrafast broadband” (FTTP / G.fast) services and need to keep meeting Ofcom’s new regulatory / service quality expectations.
On the other hand many large companies have had similar problems with such schemes and have moved to close or cap them (Royal Mail, M&S etc.). Similarly BT closed their scheme to new entrants in 2001 (i.e. total membership of 300,000, with around 33,000 employees still paying into the scheme), although existing members have continued to build up benefits and this has helped to fuel a surge in the deficit (£7bn at the last review in 2014).
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BT’s Q4 (31st March 2017) Results Statement
We have a large funding obligation to our defined benefit (“DB”) pension schemes. The largest of these, the BT Pension Scheme (BTPS or Scheme), represents over 97% of our pension obligations. The BTPS faces similar risks to other UK DB schemes: things like future low investment returns, high inflation, longer life expectancy and regulatory changes may all mean the BTPS becomes more of a financial burden.
Potential impact
The last funding valuation of the BTPS, as at 30 June 2014, provides certainty over scheme funding until the forthcoming valuation, due to start in June 2017, is concluded.
If there’s an increase in the pension deficit at the next valuation date, we may have to increase deficit payments into the Scheme. Higher deficit payments could mean less money available to invest, pay out as dividends or repay debt as it matures, which could in turn affect our share price and credit rating.
We’re considering a number of options for funding the deficit after the next valuation, as at 30th June 2017. These options include considering whether there are alternative approaches to only making cash payments, including arrangements that would give the BTPS a prior claim over certain BT assets.
A spokesperson for BT Group said, “No decisions have yet been made and our union partners and the BTPS Trustee will be involved in discussions about the review … if any changes are proposed, we will consult with our employees before making any final decisions.”
BT has only just begun its latest review of the BTPS and the operator does not expect this process, including negotiations with the CWU, to be completed until the first half of 2018 at the earliest. However we might well hear more from the CWU’s side before that date. Hopefully the two sides will be able to find a solution that doesn’t involve crippling strikes, although it’s difficult to see how BT can resolve the issue without imposing some sort of cap on the scheme.
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