The Department for Culture, Media and Sport (DCMS) has confirmed Openreach employees in the BT Pension Scheme (BTPS) will have their pensions underwritten by the government.
Following Openreach's legal separation from BT, members of the final salary scheme will have their funds protected by a Crown Guarantee, which means the government will fund their pensions in the unlikely case of the employer winding up.
It was believed the government would extend the guarantee to the new Openreach identity, but a government announcement on 16 March has now confirmed this.
The Crown Guarantee was originally implemented for the BTPS when BT was privatised in 1984. However, in the upcoming separation from BT, Openreach employees would have their pensions transferred to an Openreach segment of the BTPS with Openreach becoming a participating employer, then losing the Crown Guarantee protection.
Now, the government is seeking to amend its Digital Economy Bill, which is currently at the report stage in the House of Lords, to introduce a power to maintain the guarantee for Openreach workers.
Pensions had been a major obstacle to the separation of BT and Openreach, with BT previously arguing it would put 300,000 members' pensions at risk.
Minister for culture, media and sport, Karen Bradley welcomed the step forward.
"This amendment clears a hurdle identified by Ofcom by allowing the government to maintain pension protections for BT pension scheme members who transfer to Openreach," she said. "It will help secure the voluntary separation of BT and Openreach and provide peace of mind to affected workers."
DCMS added that the guarantee would be "subject to the satisfactory progress of Ofcom's proposed legal separation of BT Openreach".
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Defined benefit (DB) schemes that provide GMPs must revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that have been calculated on an unequal basis, a landmark court judgment said last week.
Regulators must act now to impose some "proper regulation" to stop another defined benefit (DB) transfer advice disaster, saysTim Sargisson.
Opportunities for defined benefit (DB) schemes to pursue investment approaches that help repair the UK’s economy cannot stand in the way of improving member outcomes, Aegon says.
More members transferred out of defined benefit (DB) pension schemes in October after September's record lows while values were surprisingly stable, according to XPS Pensions Group's Transfer Watch.