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EC questions BT's 'state aid' pensions benefit

EUROPE - The European Commission has opened a state aid investigation into the UK Crown guarantee accessible by the BT pension fund, which would guarantee the State pays 75% of pension benefits should the BT Group go bust.

A statement just issued by Competition Commissioner Neelie Kroes said the Commission has opened an "in-depth" investigation into whether BT Group is at a commercial advantage to other firms in Europe, because the long-standing legal agreement between the former State telecoms company means the telecoms giant is exempt from certain financial obligations.

More specifically, the arrangement allows BT to be exempt from paying a levy to the Pension Protection Fund (PPF), and the EC believes this may therefore constitute state aid.

"In the liberalised market of electronic communications, it is important to ensure that BT is subject to the same rules and obligations as its competitors to guarantee a level-playing field and fair competition, so that consumers can benefit from high-quality services and competitive prices," said Kroes.

The EC conducted an initial investigation into the Crown guarantee - established in 1984 when British Telecommunications was privatised by the UK government - in 2006 following a complaint about the competitive advantage.

It is understood the guarantee only applies to members of the scheme prior to the 1984 privatisation, and BT can only call upon the guarantee if the company goes into liquidation and there are not enough assets to cover employees' pension rights.

Kroes said the Commission is not questioning the principle the guarantee because it only benefits employees but is concerned because BT is legally exempt minimum funding requirements.

Non-confidential details will be revealed by the EC in due course but comments are now being invited from interested parties towards the investigation.

Officials at the UK's Department for Trade & Industry and the BT pension fund were unavailable for comment at the time of publication.

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