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Latest NewsPay & benefitsPensions

Government must guarantee entire BT pension scheme, rules High Court

by Daniel Thomas 21 Oct 2010
by Daniel Thomas 21 Oct 2010

The Government’s guarantee to back the pension scheme at BT must apply to all of the company’s employees, the High Court ruled today.

The decision marks a victory for the scheme’s trustees who had argued that the so-called “Crown guarantee” to cover BT’s pension’s liabilities in the case of insolvency should cover those staff who joined the company after it was privatised in 1984, as well as those who were employed when it was in public hands.

The Government had argued that the extent of the guarantee should apply only to benefits accrued by members before privatisation, or possibly benefits earned by those on the payroll before privatisation and until retirement.

Handing down his judgment, Mr Justice Mann told the court that the determination of these issues was for “technical” reasons and not because “there is any risk that BT is, or is about to become, insolvent”.

In a statement, BT said: “BT welcomes the fact that the judgment provides our employees and members of the BT pension scheme with further clarity regarding the extent of the Government’s obligations.”

Nicholas Heaton, partner at law firm Hogan Lovells, who represented the trustee, said: “This is a good result for the trustee and members. Not only does it bring greater clarity as to extent of the Government’s obligations, but the outcome is favourable to scheme members.”

A spokeswoman for the Department for Business said: “We are currently taking legal advice based on this judgment and will decide the next steps in due course.” 

The BT pension scheme is the largest in the private sector, with 340,000 active, deferred and pensioner members. At its last actuarial valuation, BT’s full liabilities were £40.2 billion and its assets were £31.3 billion – a deficit of nearly £9 billion.

In February, BT agreed to pay off the deficit in the scheme over 17 years. Previously, it had agreed to pay an extra £525 million into the scheme in 2009, 2010 and 2011, as part of an earlier deficit recovery plan. The company has now agreed to continue for a further 14 years, starting with £583 million in 2012 and rising by 3% per year thereafter.

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