BT slashes cost of legacy pension equalisation

The UK’s biggest corporate pension scheme has cut the estimated cost to legacy pension benefits of a gender discrimination case by almost 75% following analysis.

The £50.7bn (€58.5bn) BT Group scheme initially estimated the cost of equalising guaranteed minimum pension (GMP) payments at “around £100m”, according to a results statement on 31 January.

However, a subsequent results statement published on 9 May reported the estimated cost of the work at just £26m – or 0.05% of its liabilities.

Separately, hospitality services company Compass Group today reported an estimated GMP equalisation cost of £12m, down from its initial estimate of as much as £40m.

Premier Foods this week reported a £41.5m provision for GMP equalisation, or 0.89% of its liabilities. The highest reported cost so far came from HSBC, which said GMP equalisation would cost it roughly £177m – although this was still less than 0.9% of its DB obligations.

The revisions reflect findings from accounting and audit giant KPMG’s annual pension accounting survey , which found that 70% of its defined benefit (DB) pension clients recorded a liability increase of less than 1%, with 13% reporting an increase of less than 20 basis points.

Consultancy Hymans Robertson has estimated that the final combined cost to UK DB schemes could hit £8bn, but this is roughly half the initial estimate reported immediately following October’s court case.

The issue of GMP equalisation hit the headlines in October last year when the UK’s High Court ruled that the payments – which date back to 1990 – must be recalculated to ensure men and women are paid equally.

IPE research has found that, of 191 listed companies to have reported GMP equalisation estimates, 140 had costs of less than 1% of liabilities.