The defined benefit scheme of BT will close and move to a “hybrid” pension scheme, having reached an agreement with Communication Workers Union (CWU), it has been confirmed.

BT announced today (19 March 2018), that it will close its BT Pension Scheme (BTPS) and move members to the BT Retirement Saving Scheme (BTRSS), combining elements of DB and defined contribution for 20,000 non-management employees or ‘team members’.

Despite this, BT said that there are some “complex administration-related issues” that the trustee is working to resolve, on which it will provide a further update.

BT chief executive Gavin Patterson, said: “I feel it’s critical that we provide fair, flexible and affordable pensions for all our people. I’m committed to helping them save for retirement, so I’m pleased we’ve reached an agreement with our unions.

“These changes also bring far more financial certainty for the company in terms of our future pension arrangements. This will help us balance the needs of BT pensioners with the investments we are making to future-proof the UK’s communications networks and improve customer experience.”

BT has said it will make “transition payments” to all ex-BTPS members moving to BTRSS and will provide a higher contribution rate of 11 per cent for an extended period.

In addition, the 35,500 active scheme members of BTRSS will see their standard maximum contribution rate rise to 10 per cent.

The CWU has also suggested that BT increase the minimum pension contribution to £2,000, pro-rata for part time workers.

BT said in a statement: “It is intended that this new arrangement will combine elements of both DB and DC pension schemes and be designed to support those team members on lower pay scales, giving them another option for their retirement savings.

“The hybrid scheme is intended to offer employees less investment risk over the longer term and will be separate from the BTPS.”

CWU deputy general secretary, Andy Kerr, said: “Negotiations have taken place against a tough backdrop. The BTPS has a deficit last measured at nearly £14bn, with future service costs likely to double. As a result BT has been increasingly determined to end DB provision completely.

“In the DC scheme, 70 per cent of our BTRSS members will be getting a 25 per cent increase in company contributions - as well as key allowances counting towards pension for the first time. This is clearly a major improvement.”

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