BT pension indexation case starts

BT pension indexation case starts in High Court

Opening arguments in BT's High Court case to switch the index used to increase pensions in retirement for tens of thousands of pension scheme members were heard today (Friday, 8 December).

Old Bailey

BT is seeking approval to switch the inflation index used for the purposes of increasing the pensions of members of 'Section C' of the BT Pension Scheme from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI).

CPI is generally lower than RPI so this change would reduce the liabilities in the BT Pension Scheme by hundreds of millions of pounds due to lower payouts in retirement to the scheme members affected.

BT previously made the switch from RPI to CPI for members of Sections 'A' and 'B' of the scheme and argued that it was appropriate to treat Section C members the same way.

However the rules for Section C are different to the rules of Sections A and B and it is unclear whether BT has the right to make the switch for this group.

The High Court action is intended to give clarity on this point. It was expedited due to the importance of the outcome for the latest actuarial review of the BT Pension Scheme and the company's wider Pension Review.

In general terms the lawyers for BT are arguing that RPI is no longer an appropriate index to use for the purpose of increasing pensions while lawyers for a representative beneficiary say that it is.

However the case does not rest solely on the appropriateness or otherwise of RPI; there are also technical arguments about the scheme rules and who is empowered to decide whether RPI is appropriate, what test should be applied in making that decision and what standard the decision maker should be held to.

The case proceeds on Monday, when expert testimony on RPI and CPI will be heard, and is expected to conclude on Wednesday.