Changes to how UK incumbent BT can factor in inflation rates when calculating its £9.1bn pension fund deficit could reduce the scheme’s liabilities by £2.9bn, it has announced.
This follows the move by the British government to use the Consumer Price…
Changes to how UK incumbent BT can factor in inflation rates when calculating its £9.1bn pension fund deficit could reduce the scheme’s liabilities by £2.9bn, it has announced.
This follows the move by the British government to use the Consumer Price Index (CPI) instead of the Retail Price Index (RPI) to determine how much public sector payments should rise each year.
Although BT was fully privatised in 1993, when the government sold its remaining shares in the telco, its pension rules continue to reflect the state’s own rules.
CPI tends to be lower than RPI, hence the reduction in BT’s pension valuation.
However, BT said its current agreement to pay deficit contributions of £525m in 2010 and 2011 remains unchanged. It added that any reduction in its funding deficit as a result of the calculating change will reduce the number of years of any future recovery plan.