UK - British Telecom (BT) has revealed the proposed package of changes to its defined benefit scheme will save the firm around £100m (€119m) a year.

Interim results released today revealed the value of the BT Pension Scheme (BTPS) dropped by £2.9bn in the six months to the end of September 2008, which resulted in the fund reporting an IAS19 accounting surplus of just £600m, compared to £2bn in March.

However in the statement BT highlighted its review of the UK pension arrangements - which also include the defined contribution (DC) BT Retirement Plan (BTRP) and Syntegra Limited Flexible Pension Plan (SLFPP) - and suggested the cost savings of implementing the changes could be £100m a year.

The telecoms company stated: "The final decisions regarding the review will be taken once the consultation period with employees has been completed early in 2009. The changes, if implemented, will reduce the ongoing cost of our defined pension schemes by about £100m per annum and will reduce the BTPS's exposure to key risks such as mortality and inflation thereby improving the sustainability of the scheme".

In addition, BT confirmed it had agreed actions with the trustees of the scheme that has resulted in an overall reduction in equity exposure, with the allocation cut to 35% at the end of September 2008, from the strategic target of 49% listed in its statement of investment principles, which is almost half of the 60% exposure recorded at the last actuarial valuation in December 2005.

The next actuarial valuation of the fund will be conducted on 31 December 2008, which BT said, "will reflect the impact of any final changes to the terms of the scheme".

The proposed changes to the BTPS - scheduled to come into effect from April 2009 - include an increase in the normal retirement age to 65, changing the final salary link to a career average revalued earnings (CARE) basis, and stopping contracting-out of the State Second Pension (S2P). (See earlier IPE article: BT consults with staff on pension changes)

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