Court dismisses BT bid to cut its pension burden

BT HAS suffered a setback in its campaign to ease the burden of its £50bn pension scheme after the High Court rejected a bid to make payouts less generous.

The ruling preserves higher pension increases for more than 80,000 people but adds to the financial squeeze on BT as it considers the case for upgrading Britain’s broadband infrastructure by replacing millions of copper telephone lines with fibre optics.

The telecoms giant, sponsor of Britain’s largest private sector pension scheme, had applied to the court to switch inflation-linked increases from the Retail Prices Index (RPI), currently at 4.1pc, to the Consumer Prices Index, now at 3pc.

The pension pot has an estimated £14bn funding deficit and the change to a lower rate of inflation could have saved BT billions.

It argued that the terms of the scheme allowed the change because RPI had become an “inappropriate” measure of inflation. The Government abandoned the formula as an official measure in 2013 on concerns it contains an upward bias and fails to accurately reflect the price of goods.

The court rejected BT’S arguments, however. It said the company had agreed with pension trustees to use RPI in 2002, when the flaws in the measure were already known “albeit that the formula effect has worsened, and the perception of those flaws has hardened”.

Mr Justice Zacaroli said: “It is impossible to say that RPI is wrong and CPI is right, or even that RPI is more wrong (or right) than CPI, as an estimate of the likely increase in the cost of living for pensioners.”

The ruling means a group of 83,000 BT pension scheme members will continue to receive inflationlinked increases in their entitlements on the basis of RPI. The group includes 21,000 current staff, 38,500 former staff who are still working and 23,500 pensioners. All joined the company before it closed its final salary scheme to new entrants in 2001.

A BT spokesman said: “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.”

BT shares slid as much as 2.2pc following the decision.