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UK government must cover bulk of BT scheme deficit, court rules

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  • UK government must cover bulk of BT scheme deficit, court rules

UK - The UK government must cover the BT pension scheme's £7.6bn (€8.4bn) funding shortfall, the Royal Court of Justice has ruled.

The court case, first announced in July, was launched by the trustees of the pension scheme with the aim of clarifying the crown guarantee, which stated that should the telecommunications provider become insolvent, the government would step in to cover its pension obligations.

In a statement, the trustees said the judgement addressed the "two central issues" of the case.

The first addressed whether the government could be expected to cover benefits for all scheme members, or only those who joined prior to the privatisation of the company in 1984.

The trustees added: "The second issue was whether payments that the government must make into the scheme when the Crown Guarantee is triggered are to be measured by reference to the cost of buying annuities from an insurance company to meet the relevant benefits in full."

According to the Royal Court's ruling, any payments made by the government must be calculated on an annuity basis.

This means the government must calculate the costs of buying annuities to address the pension deficit, "rather than the outstanding deficiency contribution payments under the recovery plan", BT said in its own statement.

While the telecommunications company welcomed the ruling, it said it had no impact on agreed payments to the scheme.

The case, presided over by Mr Justice Mann, also ruled that the guarantee only extended to employees of BT and not of other companies that also enrolled its employees in BTPS.

However, the trustees warned that several issues remained unresolved and that only the two most important matters had been addressed.

Further hearings will seek clarification on the type of benefits the government can be expected to cover.

BTPS had £34.1bn of assets at the end of 2009, resulting in a £7.6bn deficit. The scheme has since shrunk to £33.9bn as at the end of June this year.

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