UK - BT will reduce its scheme liabilities by £2.9bn ($4.7bn) after the government's decision to use Consumer Prices Index to measure inflation, an actuarial review shows.
The telecommunications company said moving to CPI reduces the IAS19 accounting valuation of its scheme's liabilities by about £2.9bn. At 30 September this year BT recorded a total IAS19 deficit of £5.2bn, compared with £7.9bn at 30 June.
The government announced in July it would index private sector pension increases to CPI rather than Retail Prices Index. CPI has traditionally been an average of 0.7 percentage points lower than RPI over the past 20 years.
BT said for employees who joined BT before 31 March 1986 (sections A and B of the scheme), CPI will be used to determine both the future revaluation of preserved pensions for all deferred members and the rate of inflationary increase applied to pensions in payment.
For employees who joined BT between 1 April, 1986 and 31 March, 2001 (section C), CPI will be used to determine the future revaluation of preserved pensions for deferred members.
However, BT said the wording of the scheme rules is different for section C pensions in payment. BT and the trustee are taking further legal advice as to whether pensions in payment for these members will be affected by the government announcements.
It said RPI will continue to be used and assumed for these members until this review is complete.
A BT spokesman said: "This change has been triggered by the government announcements in July and will be applied from April next year. It is important we brought clarity on this matter to the scheme members as quickly as possible."
However, the Communication Workers Union criticised both the government and TPR for changes which it said will lead to the "impoverishment of BT workers in retirement" because CPI is typically lower than RPI, currently by 1.5%.
The trade union said the decision will potentially affect 331,000 people in the scheme.
CWU deputy general secretary Andy Kerr said: "This is an attack on the rights of responsible and hard working BT staff both past and present. CPI linking will mean smaller pension increases for many hard pressed pensioners and will lead to the pension falling below the real cost of living."
The CWU is seeking an urgent meeting with BT to establish what effect in real terms this will have on its members.
BT currently has a 17-year recovery plan - under review by The Pensions Regulator - in which the company will make annual deficit payments of £525m for the first three years before a fourth year payment of £583m, and then increasing at 3% per annum.
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