|
No.24/06 |
Ref: NC/SD/BTU.3/20/13 |
Date: 19th
January 2006 |
To All Branches with BT
Members
Dear Colleague
BT Pension Scheme:
Financial Position
There have been a number
of stories in the press this month about leading UK companies making
fundamental changes to their final salary pension schemes as a result of the
increasing costs of pension provision.
This has resulted in a
number of enquiries concerning the financial position of the BT Pensions
Scheme (BTPS).
Every three years the BTPS
undergoes a valuation that is designed to examine how much money needs to be
put into the pension in order to ensure that the fund can meet its
obligations. The valuation is carried out by an independent expert - an
actuary - on behalf of the Trustees.
The most recent valuation
took place in December 2002 (see LTB 302/2003). This concluded that the
funding level of the BTPS was 91.6%, the equivalent to a deficit of £2.1BN.
BT has subsequently agreed
to make additional annual contributions to the BTPS of £232M each year until
the funding level is restored to 100%.
Furthermore, as part of
the last review the Company agreed to increase its normal contribution rate
from 11.6% of salaries to 12.2% of salaries with effect from January 2003.
BT has made all the
payments required in line with the 2002 valuation. The value of the fund has
increased from £22.7BN in 2002 to £29.2BN at the end of 2004.
The BTPS Actuary is
currently conducting the next actuarial review and the results will be known
in May this year. The Union will be in discussions with BT once the outcome
of the valuation is known and further reports will be made at that time.
Separately, BT has
publicly dismissed speculation in the Daily Express that the December 2005
valuation will show a deficit of over £6BN as pure speculation.
[See attachment]
Furthermore, it is
important to note that press speculation on these issues is often related to
a measure known as FRS 17. This is an accounting measure which is used in
company accounts it is not the measure that is used in the actual valuation.
Due to the way FRS 17 operates it often results in higher deficits that the
full valuations.
It should be emphasised
that BT has not proposed any changes to the benefit structure or the
membership arrangements for the BTPS since discussions concluded on the
introduction of Smart Pensions in 2004.
The CWU’s policy remains
that any attempt to close the BTPS for existing members will be opposed by
all means possible, up to and including, strike action. We remained
committed to ensuring that the pension remains open for current members and
properly funded.
Yours sincerely
Nigel Cotgrove