BT will close its defined benefit (DB) scheme for 10,000 managers, who will be moved to the company’s define contribution (DC) plan from 1 June 2018.
The final agreement achieved after trade union Prospect, which represents managers and other professionals working at the telecom company, balloted its members on an offer negotiated at the end of last year, which accepted an initial arrangement last month.
BT manages two pension schemes: the British Telecom Pension Scheme (BTPS), a final salary scheme with more than 300,000 members and assets of more than £40bn, and the British Telecom Retirement Saving Scheme (BTRSS), a DC plan that has been in place since 2001.
Although the BTPS closed to new entrants in 2001, existing members continue to build up benefits and by some measures it is the largest private sector pension scheme in the UK.
With regard to employees other than managers, BT said it was still reviewing feedback and would discuss this with the Communication Workers Union (CWU) before making a final decision.
Alison Wilcox, human resources director at BT Group, said: "We are working hard to ensure fair, flexible and affordable provision for members of our pension schemes.
"I am pleased that we’ve been able to reach an agreement with Prospect that achieves this, and we look forward to continuing our dialogue with the CWU."
The scheme’s triennial valuation showed that the BTPS deficit had grown to £13.9bn up from around £10bn in 2015.
A 60-day consultation on the proposed changes, which included closing the DB scheme to future accrual from April this year for all active members, was launched last November and ended in January.
Prospect’s national secretary Philippa Childs said the union secured more concessions since the initial agreement.
For example, BT will allow managers in the BTPS to continue to make additional voluntary contributions into their old scheme after it closes – until 31 September 2019 – thus covering two further financial years and two bonus cycles.
On top of agreed transition payments, the period for additional employer contributions from the employer to those transferring has been extended from three to five years – up to 31 May 2023.
So for example, during that time BT will pay 11 per cent of salary for managers paying 8 per cent of salary into the BTRSS, the union said.
From 31 May 2018, the telecom company will introduce an option for managers aged 55 or over to draw their BTPS pension while continuing to work for BT for a further two years.
BTPS managers aged 55 or over who want to retire early will have the BTPS part of their pension actuarially reduced by a smaller amount – likely to be 3–3.5 per cent, from 1 June 2018 onwards.
Ms Childs said: "Prospect fully understands that this has been a very difficult time for our BTPS members.
"However, we have made some valuable improvements to the pension proposals in response to members’ concerns. We have also achieved a better pension and certainty for those already in the defined contribution BTRSS.