Crown guarantee over BT pension scheme

The High Court has stated that the government must support the BT pension scheme should the company become insolvent. The ruling was in relation to a “crown guarantee” that was given when BT was privatised in 1984.

This decision means that scheme members who joined both before and after the privatisation are covered by this guarantee. Currently, the pension scheme has a £9 billion deficit with approximately 340,000 members in the scheme.

The trustees of the pension scheme said: “The crown guarantee requires the UK government to pay any outstanding liabilities, transferred to BT on privatisation, for the payment of pensions [in the event of insolvency].”

BT said: “The key point in the judgment is confirmation that, in the unlikely event of BT becoming insolvent, the crown guarantee can cover members who joined the BT pension scheme both before and after privatisation.”

The government had argued that the extent of the guarantee should apply only to benefits accrued by members before privatisation, or possibly benefits earned by those on the payroll before privatisation and until retirement.

Handing down his judgment, Mr Justice Mann told the court that the determination of these issues was for “technical” reasons and not because “there is any risk that BT is, or is about to become, insolvent”.

www.pensionsadvisoryservice.org.uk/news/2010/october/government-to-support-bt-pension-scheme

www.personneltoday.com/articles/2010/10/21/56773/government-must-guarantee-entire-bt-pension-scheme-rules-high.html