Defined Benefit  

BT loses final salary pension case in High Court

BT loses final salary pension case in High Court

British Telecom (BT) pension scheme members will continue to see increases to their pension based on the retail price index (RPI), the High Court has decided, dismissing an attempt to cut costs by the firm.

BT was seeking approval to switch the rate used to calculate pension increases for about 80,000 members from the RPI to the lower consumer price index (CPI).

The case was taken to the High Court in December and concluded on 19 January, when it was decided the scheme’s underlying index could not be changed.

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In a statement on its website, the BT pension scheme said: “Today the High Court has published its judgment as to the correct interpretation of the Scheme Rules regarding BT’s ability to change from RPI to another index for the purpose of calculating Section C pension increases paid in the future.

“The High Court has determined that it is currently not possible to change from RPI to another index.”

It added the trustee would be analysing the judgment and provide a further update once this is concluded.

In a statement on its website, BT, which brought the case, said it it "disappointed with the decision and will now consider the judgment in detail in order to decide next steps, including the possibility of an appeal".

"The relevant index for pension increases for members in Sections A and B of the BTPS remains unchanged as the Consumer Price Index (CPI)," it added.

Trade union Prospect said it was pleased about the outcome.

Prospect national officer Philippa Childs said: “Prospect has consistently campaigned against changing indexation of pension schemes from RPI to CPI, as CPI is normally around 1 per cent lower than RPI.

“The outcome of this case is welcome as this action has caused anxiety among active and deferred members and pensioners.

“Prospect will be closely monitoring the actions of BT to ensure that our members' views are heard and taken into account.”

It is understood BT could benefit from huge savings by switching from using RPI, which rose by 3.6 per cent in the second quarter of 2017 and is expected to be hovering around the 3 per cent inflation mark by 2020, according to the Office for Budget Responsibility.

CPI inflation, in contrast, was 2.7 per cent in Q2 2017 and is expected to be levelling out at the 2 per cent mark by 2020.

The court action marked the biggest step yet taken by BT's chief executive Gavin Patterson since 2013 in a bid to get to grips with the huge pension bill.

In a statement at the time BT said: “As part of the pensions review, we’re reviewing the use of RPI as the index for calculating increases to pensions in payment for Section C members in the BT Pension Scheme, and liaising with the BTPS Trustee about this.

“The scope of this review includes the future increases received on benefits already built up in the BTPS, including by Section C members who have left BT and those who are currently receiving a BTPS pension.