BT prepares for pension scheme revaluation amid mounting speculation over closure to further accrual
- Credit: PA
More than 30,000 BT employees, including hundreds in East Anglia, could see the value of their pension capped, with the telecoms giant reported to be considering the closure its final salary scheme to all further accrual.
According to BT’s latest annual report, published earlier this month, the defined benefit BT Pension Scheme (BTPS) had an accounting deficit of £7.6billion as of March 31, 2017, up from £5.2bn a year earlier.
And, with a routine reevaluation of the scheme due to commence shortly, there was speculation in the national media over the weekend that BT could be about to close the scheme to further contributions.
Such a move would affect around 32,500 “active” members – those still paying into the scheme – representing a significant proportion of the group’s total workforce which numbers around 72,000 in the UK.
That figure includes more than 10,000 people in the East of England, including around 3,000 at its Adastral Park research facility near Ipswich.
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Like many employers, BT closed its final salary scheme to new members some years ago but, due to a combination of increasing life expectancy and low returns from some forms of investment such as government bonds, deficits have continued to increase, resulting in a growing number of schemes being closed entirely.
BT said in its annual report: “If there’s an increase in the pension deficit at the next valuation date, we may have to increase deficit payments into the scheme.
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“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.”
This has led to speculation that BT could now seek to tackle the risk of the deficit increasing yet further by closing the BTPS to further contributions.
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.”
Closure of the BTPS to further accrual would not affect those already receiving a pension under the scheme, who are thought to total nearly 200,000, or the scheme’s 64,000 “deferred” members, those no longer contributing but yet to start drawing a pension.