EUROPE/UK - The European Commission (EC) has ordered British Telecom to pay £16.6m (€18.5m) for withholding the Pension Protection Fund (PPF) levy subsidy under the terms of the UK Crown guarantee.

The EC said today it has concluded the Crown guarantee covering the pension liabilities of BT within the EU telecommunications markets is partially unlawful under EC Treaty state aid rules, and BT must therefore pay the full levy due since 2005, with interest.

BT said in response: "We are disappointed however, with the Commission's decision regarding the Pension Protection Fund and we will review whether to appeal the decision to the European Court of First Instance once we have the detailed information of the Commission decision."

Independent pensions consultant John Ralfe, a former Boots finance chief and widely credited with switching the Boots pension fund out of equities and wholly into bonds in 2001, told IPE today BT "had gotten away lightly".

"It is the end to a minor irritation for BT," said Ralfe, who considers the ruling - which followed an in-depth investigation, opened in November 2007 - to be "small beer".

Moreover, Ralfe thinks the ruling still does not clarify whether the guarantee is broadly written, as BT claims, or narrowly written, as the UK government claims.

BT said the full PPF levies covering both pre- and post-privatisation members of the BT Pension Scheme for 2006/07, 2007/08 and 2008/09 has been paid into an escrow account. The EC said BT has blocked £16.6bn.

According to the BT spokesman, the legal and financial position is not yet clear for 2009/10 and future years.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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