Tensions Flare Over BT Pension Closure Plan

The U.K. communications giant has outlined plans to close its pension plan to 32,000 employees.

Photo courtesy BT Group plc

Photo courtesy BT Group plc

BT has detailed plans to close the British communication company’s defined benefit pension fund, enraging its union workers.

Starting in April, 11,000 managers will be moved into a defined contribution retirement plan, according to a BT statement Wednesday. The company said it would introduce “an additional higher employer contribution rate” to the DC plan for three years and make additional transition payments to “smooth the move.”

The Communications Workers Union opposes the closure of the defined benefit plan and fired back that it would challenge the proposals. BT said it could keep the DB scheme open to its 21,000 employees who aren’t managers — but with smaller benefits and increased contributions from workers — or give them the same deal as managers.

The proposed changes are “nothing less than a slap in the face for loyal employees,” CWU said in a statement Wednesday. The group sent BT union members a bulletin urging them to reject the proposals outlined by the telecom giant.

“We have made it clear that if BT goes ahead with closure there will be an industrial dispute,” the trade union said. “The proposal is not good enough.”

The company contributes “significantly less” than the average U.K. employer to its DB pension scheme, according to CWU. For BT, the costs and risks of not making changes to it defined benefit plan are too high. The company says less than half of its U.K. employees are now in the defined benefit scheme, but more than two thirds of the company’s pension costs will be soaked up by the plan if no changes are made.

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“If we do nothing, BT will be facing hundreds of millions in extra contributions to the scheme, on top of our current costs,” a BT spokesman said. “This would damage our ability to invest in the U.K.’s communications networks, customer experience and jobs.”

Proposed changes to BT’s pension scheme follow a slew of DB plan closures as companies struggle with the rising cost of covering retirement benefits. In October, Japan Tobacco International announced plans to close a U.K. Gallaher pension plan, and British Airways outlined similar proposals for one of its retirement plans a month earlier.

In August, a survey of defined benefit schemes offered by U.K. FTSE 100 companies found pension schemes had a combined deficit of £17 billion ($22.4 billion).

“We have spent considerable time developing these proposals, including working with BT’s recognized trade unions, as we understand the importance of these changes for our employees,” the BT spokesman said. “We’ll be consulting with our employees over the coming weeks and listening to their feedback.”