BT backs away from CPI

Trustees and unions have been told the telecoms giant will not seek the shift for a section of its DB scheme which has the retail prices index (RPI) written into its rules.

In a November announcement, BT said it was taking “further legal advice”, together with trustees, on whether pensions in payment for those members would be “affected” by government RPI/CPI announcements (PW 22/11/10).

Now the telecoms company has confirmed toschemeXpert.com  it will not seek the index shift for DB members designated ‘section C’ – those who joined post-1986.

A BT spokesperson said: “Following discussions with the trustee and unions, BT will, for now, continue to use RPI (capped at 5%) for increases to pensions once in payment for section C members.”

He added the union is continuing to press BT to lessen the impact of the change on scheme sections A and B, which will shift to CPI.

Andy Kerr, Communication Workers Union (CWU) deputy general secretary, told schemeXpert.com the union was concerned about the “inconsistency” across the schemes.

“Obviously our preference is to retain RPI linking across the board, but the government’s decision to switch annual revaluing rates to CPI makes this a severe challenge,” he said. “We will continue to seek to ameliorate the decision as far as possible.”

The post-1986 section of BT’s DB scheme – which contains 83,000 members, 28,000 of whom are still active – dictates RPI be used as a measure for pension increases unless it ceases to exist or is “no longer appropriate”.

Employers seeking to change their inflationary measure were dealt a blow in December as the government said it would not give schemes a statutory override for schemes that have an index written into scheme rules.

Mark Howard, a partner at Barlow, Lyde and Gilbert, said the “random” effect of the government’s RPI to CPI shift owes to specific scheme drafting.

“To a degree, it’s down to the whim of a draftsman, however many years ago, when RPI was the only measure used for delivering any of these increases,” he said.

The BT Pension Scheme declined to comment.