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BT and Unions Agree to Tackle Multi-Billion Pensions Black Hole

Monday, Mar 19th, 2018 (2:00 pm) - Score 1,741

The Communications Workers’ Union (CWU) and BT have reached a deal to close the operator’s defined benefit pension scheme (BTPS), which should avoid the possibility of a UK strike and help to plug the growing pension deficit (£7bn at the last review, with some warning it could hit £14bn).

BT has been seeking to close the BTPS because things like future low investment returns, high inflation, longer life expectancy and regulatory changes (e.g. Ofcom’s Strategic Review and Openreach’s legal separation) have all meant that it was fast becoming more of a financial burden. Various other UK companies are facing similar problems with such schemes.

Last year the CWU warned BT that it would “use all means up to and including industrial action” if the telecoms and broadband giant pushed forward with their plans to close the company’s “gold-plated” defined-benefits pension scheme (here). BT actually closed the BTPS to new entrants in 2001 (i.e. total membership of 300K, with roughly 33K employees still paying-in), although existing members have continued to build up benefits.

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However BT and the Prospect union recently agreed to close the BTPS for around 10,000 managers (they were shifted over to the BT Retirement Saving Scheme [BTRSS]). Meanwhile today’s deal with the CWU means that the old BTPS will be completely closed from early summer 2018, which affects the future pension arrangements for around 20,000 non-management employees (aka – team members).

Naturally there’s a catch. The deal requires BT to establish a new “hybrid pension arrangement” over the coming year for team members leaving the BTPS. This new arrangement will combine elements of both defined benefit and defined contribution pension schemes, alongside being designed to support those team members on lower pay scales (i.e. giving them another option for their retirement savings).

Gavin Patterson, BT’s CEO, said:

“I feel it’s critical that we provide fair, flexible and affordable pensions for all our people. I’m committed to helping them save for retirement, so I’m pleased we’ve reached an agreement with our unions.

These changes also bring far more financial certainty for the company in terms of our future pension arrangements. This will help us balance the needs of BT pensioners with the investments we are making to future-proof the UK’s communications networks and improve customer experience.”

Andy Kerr, CWU Deputy General Secretary, said:

“The new hybrid pension is an innovative solution that will share future risk between BT and our members. In the defined contribution scheme, all of our BTRSS members paying core contributions will be getting an increase in company payments – as well as key allowances counting towards pension for the first time. This is clearly a major improvement.”

Apparently any benefits accrued in the BTPS for service prior to 1st June 2018 will remain preserved within the BTPS and subject to revaluation in line with BTPS rules and relevant legislation. BT has also updated their plans and will make additional transition payments to all ex-BTPS team members moving into the BTRSS, as well as providing a higher maximum BT contribution rate of 11% for an “extended temporary period.”

In addition to the enhancements offered to ex-BTPS members, BT has also enhanced their newer BTRSS scheme (35,000 active members) by increasing their standard maximum contribution rate to 10% for all members; plus a few “other improvements.” Separately, BT has agreed a two-year pay deal with the CWU, for team members, which will see a 3% increase both this year and in 2019.

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However, the update also revealed that “there are some complex administration-related issues that the Trustee is working to resolve. In the event that these issues impact the timetable we will provide a further update” (no details provided). The new agreement probably isn’t exactly what BT would have liked but they appear to have avoided the threat of a strike, which could have disrupted their broadband and infrastructure work.

Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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