BT Pension Trustees Seek Govt Guarantee

by Robin Pilgrim, LawAndTax-News.com, London

15 July 2010

The Trustees of BT’s pension scheme are seeking a High Court ruling on whether the UK government will underwrite some of BT’s pension liabilities.

The court will have to consider the issue of the so-called ‘Crown guarantee’ that was set up before BT’s share issue and its transformation into a publicly-quoted company in 1984.

BT’s pension fund has a deficit of GBP7.6bn. The Trustees of BT’s pension fund have brought the case against BT and the Department of Business Innovation and Skills (BIS). The Trustees are seeking a ruling that in the event of the collapse of BT as a company, the UK government will be liable to fill the deficit hole, landing UK taxpayers with another huge bill.

The terms of the original Crown guarantee, which was made at the time of the privatisation of BT, are not clear. BT is trying to fill the pension hole by making annual payments into the scheme, though this course of action has yet to be approved by the Pensions Regulator.

Lawyers representing the government question the Trustees’ view that the government should underwrite up to 75% of the liabilities under the scheme. In 1984, Lord MacKay of Clashfern, former Lord Chancellor, was quoted in Hansard as saying: “The government stands behind the pension entitlement of current employees in respect of all their service to retirement; that is to say, service both before and after the transfer date".

A verdict on the case is not expected until October.

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