BT latest to consider closing DB scheme to staff

Telecoms giant BT is considering closing its defined-benefit (DB) pension scheme for existing staff.

BT is preparing to start negotiations with pension trustees about the future funding of the scheme and closing the scheme is one of the options on the table, according to The Guardian.

A BT spokesman said: ‘We are starting discussions with the trustee of the BT pension scheme about the triennial valuation. We don’t expect this process to be completed until the first half of 2018 at the very earliest.’

Any cap on benefits for existing members would affect about 33,000 employees currently paying into the scheme, out of 300,000 members in total.

Over the last 12 months (01 April 2016 to 31 March 2017) the pension scheme’s accounting deficit, net of tax, rose over the year £5.2 billion to £7.6 billion.

In its latest annual report, published last week, BT said: ‘We have a large funding obligation to our defined benefit (DB) pension schemes. The largest of these, the BT pension scheme (BTPS), 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.’

The report continued: ‘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 of 30 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.’

Courtesy of CityWire