Defined Benefit 

BT loses appeal to change benefits uprating

BT loses appeal to change benefits uprating

BT pension scheme members will continue to see increases to their pension based on the retail price index (RPI), as the company has lost an appeal against a High Court decision on this matter.

In a ruling handed down today (December 4), the Court of Appeal dismissed the telecom company's request, considering the earlier High Court decision was correct.

BT was seeking approval to switch the rate used to calculate pension increases for about 80,000 members in the BT Pension Scheme (BTPS), its defined benefit (DB) plan, from RPI to the consumer price index (CPI).

CPI is generally lower than RPI, and the latter has not been considered a "national statistic" by the Office for National Statistics since 2013 because the formula used to calculate it did not meet international standards.

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

A BT spokesperson has now said: "We are disappointed with the outcome and will now consider the judgment in detail in order to decide next steps."

It is understood the telecom company could benefit from huge savings by switching from using RPI, which stood at 3.3 per cent in October 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 2.4 per cent in October and is expected to be levelling out at the 2 per cent mark by 2020.

In a similar case last month the Supreme Court had ruled that Barnardo’s pension scheme won’t be able to change the measure of inflation used for pension payments either.

Stephen Scholefield, partner at law firm Pinsent Masons, said the latest judgment showed the importance of focusing on the words in the pension scheme deed and to interpret these correctly.

He said: "Having done that, the judge had to decide whether RPI had become inappropriate. The Court of Appeal’s role was to assess whether the judge did that properly, rather than to assess matters again itself. It decided that the judge had not erred and so dismissed the appeal.

"Whilst the wording in the BT scheme is unusual, it should give comfort to trustees who have had to consider similar questions in what will no doubt continue to be a hotly debated matter between employers and trustees."