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Your BT Pension

BT Pensions Review Consultation

BT has launched their consultation with employees about proposed changes to their pension schemes. The consultation will run from 15 November 2017 until 17 January 2018. You will soon receive from BT a copy of the consultation booklet relating to the scheme that you are an active member of, please make sure you read that booklet carefully and make sure that you understand its implications for you.

Section C members will also receive a letter from BT regarding the company’s proposal to change indexation of pensions in payment from RPI to CPI, on which we communicated previously.

Prospect has been heavily involved in consultation about the proposals since BT announced the review in May. This consultation has been very intensive and difficult; we recognise that any proposed changes to pension provision will be extremely emotive so we have been very thorough in examining the numbers that BT has presented to us and the assumptions they are making. Through the consultation we have explored all possible outcomes, including the potential for resisting the company’s proposals but ultimately reached the conclusion that members would expect us to negotiate the best possible outcome and ballot them on that basis.

When BT made changes to the BT Pension Scheme (BTPS, the Defined Benefit scheme) in 2009 they and the unions believed that the changes that had been agreed then would make the scheme sustainable into the future. While the scheme has remained open to existing members since 2009, the economic environment it operates in has continued to change. BT has set out their case for change in the booklet that has been sent to BTPS members. We don’t intend to repeat those numbers, only to say that all defined benefit schemes are facing similar financial challenges and many have closed or made significant changes to their benefit structures.

The BTPS scheme closed to new members in 2001 and since that point new BT employees have become members of the BT Retirement Saving Scheme (BTRSS, the Defined Contribution scheme) Part of Prospect’s agenda through the review has been to improve the contribution structure in the BTRSS and to encourage BT to contribute more to support future pensions for all members. We’ve been successful in making progress with that agenda and those changes are set out later in this circular.

BT Pension Scheme proposals

BT is proposing to close the BTPS to future accrual for all managers and professionals. One of the options being considered for team members is also closure (Team member: Proposal1). We don’t propose to repeat the arguments that BT are making about the relative costs of the BTPS for managers and team members or the relative benefits for managers in the BTPS in comparison to managers in the BTRSS, those are set out in the consultation documents and you can draw your own conclusions.

What we can say with confidence is that Prospect has fully explored the possibilities for keeping the BTPS open for managers and concluded that the changes that BT would be looking for to achieve that would reduce the value of the scheme to an unacceptable level. The changes being proposed to keep the scheme open for team members include paying increased contributions, a cap on pensionable pay increases  and an accrual rate of 1/120ths (Team member: Proposal 2).

Having fully explored all options Prospect concluded that whilst we deeply regret that BT is proposing closure we should explore what transition payments would be made available to support managers becoming deferred members of the BTPS and moving across to the BTRSS for future service. Following closure managers’ BTPS benefits will continue to be increased subject to scheme and section rules.

We have negotiated additional transition payments for members moving across to the BTRSS from the BTPS as follows:

Age at 1 April 2018

Additional transition payments (% of BTRSS Pensionable Salary)

Total amount of transition payments (% of BTRSS Pensionable Salary)

<40

2% for 10 years

20%

40-44

2% for 8 years

16%

45-49

2% for 7 years

14%

50-54

2% for 5 years

10%

55-59

2% for 3 years

6%

>60

2% for 2 years

4%

 
BT has also agreed that for those members who are moving across from the BTPS and who want to contribute 8% into the BTRSS that BT will contribute 11% for a period of 3 years. For those who want to contribute less, the BTRSS contribution rates below will be applicable on top of the transition payments.

BT is also proposing some flexibility around retirement options which they are aiming to introduce as close to 1 April 2018 as is practicable. These are:

  • The option to take your pension whilst continuing to work for BT (for a period of up to 2 years).
  • The option to retire from BT early with lower pension reductions than are currently available.
  • The option to take your pre 2009 benefits (for which the normal pension age is 60) before taking the post 2009 benefits (for which the normal pension age is 65). Although BT are making it clear that this option is unlikely to happen before 2019.

As part of the consultation BT will be providing BTPS members with their personal pension information and access to a modeller to allow you to see for yourself what these proposals might mean for you and your retirement plans. Please take time to look at what this will mean in practice in addition to reading the member illustrations.

BT Retirement Saving Scheme proposals

BT has agreed with Prospect to improve the BTRSS contribution structure as follows:

Standard member rates

BT current standard rates

Proposed new BT standard rates

Total proposed new rates into BTRSS

5%

7%

9%

14%

6%

8.5%

9.5%

15.5%

7%

9% (max)

10%

17%

 

These improvements to the BTRSS contribution structure will apply to existing and future BTRSS members, not just those transferring into the BTRSS on closure of the BTPS to future accrual for managers.

Other factors

There are also other factors to take into account when considering these proposals. The arrangements in the event of death or medical retirement are different in the two schemes and you should look at how those arrangements might impact you depending on the scheme you are currently an active member of and what the change of scheme will mean.

On closure of the BTPS to managers BT are insistent on ending the redundancy provisions which waive of the actuarial reduction for early payment and additionally enhance pensionable service for Section B members.  We are concerned at this as, whilst outdated, these provisions have wider implications for job security across the managerial and professional population.  However, we’re in discussion with BT on a reorganisation policy that includes clear and consistent redundancy terms for all managers and professionals.  BT has assured us that this does not fundamentally change its approach to job security.

Prospect’s position on BT’s proposals

BT has decided to pursue closure of the BTPS to future accrual for managers. Prospect have explored in detail the potential options for keeping the scheme open, but we have concluded that those options would not result in good outcomes for members, given the significant changes to the BTPS that were made in 2009. We have therefore negotiated significant improvements to the BTRSS for all members as well as transition arrangements for those transferring from the BTPS into the BTRSS.

During the negotiations, we have sought to minimise the negative impact of the closure of the BTPS to future accrual, taking into account the differing circumstances of Prospect members who for instance may be close to retirement or still have many years of employment ahead of them.

While people will have their own views about how compelling BT's arguments for closure are, what is clear is that BT is determined on this course of action. In that case Prospect has acted to protect and advance members interests in the negotiations as effectively as we possibly can. We are therefore reluctantly proposing not to oppose closure of the scheme for managers and on that basis we have been able to agree acceptable replacement arrangements

We will be holding members’ meetings and conference calls across the country to allow you to have your say. Prospect is a member-led organization, and while we believe we have negotiated an acceptable set of arrangements, we do want to give you the opportunity to contribute directly. We will be conducting a ballot of members on the these pensions proposals and the company’s pay offer during December 2017, but in advance of that you can contact us at cmd@prospect.org.uk

Feedback to BT

BT are consulting on their proposals, and we strongly encourage you to make your views known to them during this consultation period, so please make sure that you fully absorb the proposals and feedback your views to BT by emailing them at bt.consultation@wealthatwork.co.uk or writing to them at: BT Client Services Team, Level1, Bull Wharf, Redcliff Street, Bristol, BS1 6QR