BT has reached a deal with the Communications Workers Union (CWU), allowing the telecom giant to fully close its defined benefit pension scheme.
As per the deal, which removes the possibility of strikes and broadband outages as a result of industrial action, will send members into a hybrid scheme that is set to combine defined benefits and defined contribution pensions for lower-paid employees. The proposal is expected to be voted on by CWU members in the coming weeks.
Although BT will officially close the 300,000-plus member defined benefit plan in June, the company will increase its maximum employer contributions from 8% to 10% for its BT Retirement Savings Scheme, a defined contribution scheme. BT will also increase its minimum contributions to £2,000, recommended for part-time staff.
“The proposed agreement significantly improves on BT’s original proposals, secures a continued defined benefit pension option for BTPS members and significantly enhances the defined contribution pension which the CWU has long argued was inadequate—especially at lower contribution levels,” CWU Deputy General Secretary Andy Kerr said in a statement.
Employees will also see the first of two 3% pay raises in April. The second will occur in April 2019.
Following further talks with the CWU as well as the union’s vote, BT expects the hybrid pension to be set up later this year.
“Taken together with a pay increase in excess of 6% over two years, the Executive firmly believes that the company’s full and final offer is the very best that could be secured by negotiation for both BTRSS and BTPS members,” Kerr added. “Accordingly, we will be strongly recommending members to accept the package in the forthcoming ballot—details of which will be announced shortly.”
Originally the BT pension scheme was closed to new members in 2001, but experienced issues with its liabilities, with the primary driver of the current issue being member accruals. According to the June 2016 interim assessment, the scheme’s funding deficit was at £14billion.