Thousands of BT employees will be told later this month of proposed cuts to their pension benefits as the telecoms giant wrestles with a near-£14bn deficit in its retirement schemes.
Sky News understands that BT Group will say on Thursday alongside its half-year results announcement to the City that it is close to setting out a concrete plan to slash the soaring cost of its pension obligations.
Sources said the company was leaning towards closing the BT Pension Scheme to future accruals and moving the remaining years of members’ pensions to its defined contribution scheme.
The move comes as BT prepares to outline a new formula for paying its prized dividend following recent speculation that it could be cut after a difficult few months for the company.
The telecoms, broadband and pay-television provider – which competes with Sky plc, the owner of Sky News – will avoid such a reduction, according to sources, but will switch to a model that will re-weight the dividend towards the second half of its financial year, according to analysts.
Sources said that BT’s Global Services unit, which has been the source of many of the company’s challenges this year, including a huge writedown because of a fraud in its Italian business, had continued to struggle.
Image: BT’s pension schemes have around 300,000 members
The division, which serves corporate customers, is forecast to show further declines in revenues and operating income.
In a note to employees seen by Sky News, BT’s new chairman, Jan du Plessis, said on his first day in the role that while “the last year has been a difficult one for BT…we cannot afford to dwell on (it)”.
He wrote: “We can only create a valuable and sustainable business for our shareholders by tirelessly looking after our customers and resolutely focusing on the two most important things they want fromus – service and connectivity.”
Mr du Plessis added that he looked forward to “supporting Gavin (Patterson, BT’s chief executive) and his management team as we work together to serve both our customers and our shareholders”.
During private meetings with shareholders, Mr du Plessis has backed Mr Patterson’s leadership of the company, while leading investors contacted by Sky News said they had no desire to see a change of chief executive.
If confirmed, the pensions decision will make BT the latest in a string of blue-chip companies to attempt to reduce the burden of their retirement costs by closing defined benefit schemes to future accruals.
The 32,100 active members of the defined benefit scheme have been braced for the move since the company told them during the summer that it was reviewing options to “make the scheme fair, flexible and affordable”.
In total, almost 300,000 current and former staff are members of BT pension schemes.
In a statement, a BT spokesman said: “We’re still discussing a range of possible changes we could make to our pension schemes with our unions.
“Given this, we are not currently in a position to provide more detail beyond the recent communications we have had with our employees on the need for changes to our pension schemes.
“We hope to be in a position to consult formally with employees on proposed changes to our pension schemes within the coming month and are confident we will reach an agreement that is fair, flexible and affordable for all.”
BT’s anticipated decision to close its defined benefit scheme will be separate to a court hearing scheduled for early December when it will seek court approval to switch the basis for calculating future pension increases from the Retail Prices Index to the lower Consumer Prices Index.
Analysts at Bernstein wrote on Wednesday that the “worst is over for BT regarding its pension deficit”, with a new triennial valuation due next year.
Source: SKY News