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BT faces battle with unions over pension scheme overhaul

BT faces a confrontation with its trade union over plans to reduce pension contributions for 21,100 rank and file staff in a bid to ease the burden of the massive funding deficit in its retirement fund.
The Communication Workers Union (CWU) said it will urge its members to reject the company’s proposals in a 60-day consultation beginning tomorrow.
BT said it could keep its keep its defined benefit scheme open for 21,100 non-managerial staff including engineers. However, it will cut its share of contributions in an attempt to encourage them to voluntarily switch to a defined contribution scheme.
Alternatively, BT said it could close the final salary and force staff into the defined contribution scheme, albeit with a three-year boost to its employer contributions. Around 11,000 manager will be given no option but to move over on the same terms.
The CWU, which represents BT engineers, said BT’s plans were “unacceptable”.
Deputy general secretary Andy Kerr said: “We would like to reach an agreement with BT but the current proposals for both schemes are unacceptable.
“We are absolutely opposed to the closure of the defined benefit pension and any changes to it need to take account of members’ retirement expectations. The defined contribution scheme also needs to be significantly improved.”
“Our members deserve better and BT can afford more.”
BT is attempting to reduce its pension bill as it faces pressure from the Government and regulators to invest in broadband upgrades and concern from shareholders over the affordability of its dividend.
The Telegraph revealed in May that BT was considering closing its defined benefit pension scheme to new accruals. The overall retirement fund has more than 300,000 members and liabilities of ?57bn, making it Britain’s biggest private sector pension. The defined benefit element closed to new entrants in 2001 but around 34,000 current BT staff joined before the cut-off and are still building up their defined benefit retirement pots.
BT executives have been in negotiations with union leaders over the plans for several months. They had hoped to avoid a stand-off with the CWU, which has voted for strike action over similar proposals at the Royal Mail.
A senior BT source said: “We have got the regulator and the Government to handle at the moment. We can’t afford a fight with the staff too.”
BT faces battle with unions over pension scheme overhaul

BT CFO Simon Lowth is leading efforts to reduce the company's pension burden
The company will now face further negotiations to avoid an industrial dispute.
A BT spokesman said: “If we do nothing, BT will be facing hundreds of millions in extra contributions to the scheme, on top of our current costs. This would damage our ability to invest in the UK’s communications networks, customer experience and jobs.”
Changes to the BT pension scheme are part of a multi-pronged attack on the deficit by chief financial officer Simon Lowth ahead of a triennial review of its assets and liabilities. At the last count in 2015 the funding shortfall was ?7bn and BT has agreed to make annual top-up payments of up to ?250m until 2030.
Low interest rates mean the black hole is expected to widen this time to as much as ?14bn, providing pension trustees with potential grounds to demand higher payments.
As well as partly closing the final salary scheme, Mr Lowth is also seeking to shift pension payout increases from the retail prices index to the less generous consumer prices index. A court hearing on the plan is scheduled for next month.
BT is also offering pension trustees rights over its network assets in the event of insolvency in hope they will accept a less onerous top-up payment schedule to close the scheme’s ?14bn deficit.
In a recent note to clients, Barclays analysts said the manoeuvres along with lower than expected increases in longevity is likely to deliver “material improvement” in BT’s pension burden when the triennial review is completed early next year.
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