Prospect backs members in further BT pensions legal case

Prospect backs members in further BT pensions legal case

A High Court hearing into a further BT legal challenge to pension increases concluded last week. The case relates to pension increases for certain members of Section B of the BT Pension Scheme (BTPS).

The latest court hearing is different to another legal challenge by BT – heard in the Court of Appeal last month – relating to the pension increases applying to members of Section C of the BTPS.

The High Court hearing has a direct impact on 8,000 Section B members who reach State Pension Age (SPA) between 6 December 2018 and 5 April 2021.

If BT’s action succeeds, it would reduce the benefits of this group by about £120 million in total; with an average loss of about £15,000 per member. It is possible that younger members of Section B may also be affected, depending on future government decisions.

The challenge arises because of a decision by the Treasury to protect certain pension increases for members of public sector pension schemes. Without that decision, public sector pension scheme members would have lost part of the increase on a proportion of their payments known as the Guaranteed Minimum Pension (GMP).

The rules of Section B of the BTPS require the trustees to follow the increases paid by public sector pension schemes, and so Section B members benefit from this protection as well. These legacy provisions exist because of the protections that applied when BT was privatised in 1984.

The Treasury previously announced protection for people reaching SPA from April 2016 to 5 December 2018 and BT is not challenging these increases. But the company has challenged the way the protection was extended to people reaching SPA between 6 December 2018 and 5 April 2021.

BT argued that members of Section B of the BTPS enjoyed a windfall gain due to the link in the scheme rules to public sector pension schemes. The company wants the High Court to force the Treasury to implement its decision to protect public sector pension scheme members in a way that does not require the trustees of BTPS to also protect the relevant members of Section B.

Prospect national secretary Noel McClean rejected this line of argument: “Firstly, this is not a windfall gain; this is just protecting the pension increases that Section B members were entitled to,” he said.

“Secondly, it is hypocritical for the company to enthusiastically follow the public sector rules when it meant switching the index for pension increases for Section B members from RPI to CPI and saving billions of pounds, but then object when the same meant that a small proportion of those savings had to be returned to some members of Section B.”

The hearing took place on Wednesday 7 and Friday 9 November 2018 at the High Court in London. A result is expected in the coming months.

  • The BTPS was closed for future accrual from 1 June 2018.