BT loses court battle to change to CPI indexation

BT has lost its court battle to change its pension scheme indexation from the Retail Price Index to the Consumer Price Index rate of inflation.

The case was taken to the High Court in December and, today, it was ruled that BT cannot swap the index used to increase pensions for Section C members of the BT Pension scheme, who would have been affected by any changes.

The case concerned the interpretation of the BT Pension Scheme Rules, in particular BT’s ability to change the basis for calculating increases to pensions in payment from RPI to CPI (or another alternative index) for Section C Members of the Scheme. The proceedings were concerned with the questions of, among other things, which set of scheme rules applied and whether RPI had “become inappropriate” for the purposes of the relevant scheme rules.

BT argued that RPI had “become inappropriate” and, therefore the company could, following consultation with the trustee, switch away from RPI. The case had significant implications for pensioners because CPI is generally lower than RPI. The representative beneficiary argued that RPI had not “become inappropriate” under the relevant scheme rules. The trustee sought clarity on all relevant issues so as to enable it to administer the pension increase entitlements of Section C Members of the Scheme with certainty.

Acting on the behalf of the BT Pension Scheme trustees was law firm Slaughter and May, which said a primary issue which led Mr Justice Zacaroli to rule in favour with the scheme was determining that the matters and events put forward by BT were not such as to have caused RPI to have “become inappropriate” for the purposes of the relevant scheme rules.

A spokesperson for BT said: "In December 2017, we sought a decision from the High Court as to whether it would be possible to change the index used to calculate pension increases paid in the future to members of Section C of the BT Pension Scheme (BTPS) from the Retail Prices Index (RPI) to another index.

"The High Court has handed down the judgment today which confirms that it is currently not possible to change from RPI to another index. We are 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)."

Commenting, 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.

“However, BT has told members of the scheme that it will be considering next steps after the ruling including the possibility of an appeal. Prospect will be closely monitoring the actions of BT to ensure that our members views are heard and taken into account.”

BT had sought to change its indexation to CPI as a way to plug its ballooning deficit. Its proposal to try change to RPI is part of its overall pensions review, which has recently seen it reach an agreement with members to close its defined benefit pension scheme to future accrual.

The deal, which was negotiated by the union on behalf of members, will see the BT Pension Scheme (BTPS) close to future accrual with members moved across to the BT Retirement Saving Scheme (BTRSS), affecting 11,000 managers employed before 2001.

The new offer includes; an increase in pay by 1-2 per cent depending on performance rating and position in pay range; extra transitional payments for members who are being moved out of BTPS to BTRSS; and, an increase in employer contributions for existing BTRSS members.

In addition, a spokesperson for BT said the triennial valuation of the scheme is "proceeding and constructive discussions continue" with the scheme's trustee. It is expected to be completed in the first half of the 2018 calendar year.

"We continue to review the future pension benefits under our main defined benefit and defined contribution schemes in the UK, with the objective of providing fair, flexible and affordable pensions. We have just completed a consultation with our affected employees and are now considering their feedback before concluding the review."

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