BT plans wholesale reforms of pension scheme

BT plans wholesale reforms of its £35bn pension scheme following its profit warning in an effort to cut costs by raising the retirement age from 60 to 65, increasing staff contributions and basing payouts on a career average instead of final salary.

The telecom giant is in negotiations with the Communication Workers Union and Connect, which represents BT managers and proposals of the changes will be sent to members in the next few weeks at the start of a formal consultation, The Times reports.

Hanif Lalani, BT finance director is replacing François Barrault as head of the division, but Lalani stays responsibile for BT’s pension fund during the negotiations.

Actuaries will make a three-yearly valuation of BT’s scheme next month. But the stock-market slump will expose a giant funding gap, analysts like Bernstein Research’s Robin Bienenstock believes. He estimates a £5bn deficit and thinks trustees will demand top-up payments of £500m a year.

Further reading:

BT Global Services chief quits after profit warning

BT warns of disappointment in Global Services arm

Read The Times story