back to article BT: We're shuttering final salary pension scheme

Former UK state-owned telco monopoly BT has confirmed the closure of the defined benefit BT Pension Scheme (BTPS) from the end of May with a "hybrid" replacement waiting in the wings. BT is desperate to staunch the flow of red from its accounts caused by a pension deficit that has doubled to £14bn in just three years, and …

  1. ecofeco Silver badge

    Yes we changed the deal

    Pray we do not alter is more.

    (Hrrhshkrrr)

  2. SVV Silver badge

    As could be expected....

    "BT's preferred route was to move entirely to a DC model, ...... resulting in no further cost to BT but a lot more risk for the employee"

    Meanwhile....

    "BT chief executive Gavin Patterson received a £1.3m bonus on top of his £950,000 basic for the last financial year, it has been revealed. Patterson took home a total package worth more than £4.4m, up 5.7 per cent on last year."

    Ker-ching!

    1. Commswonk Silver badge

      Re: As could be expected....

      Ker-ching!

      As we are talking "BT" here should that not be

      Ker-ching Ker-ching!

      (pause)

      Ker-ching Ker-ching!

      (pause)

      Ker-ching Ker-ching!

      (pause)

      Ker-ching Ker-ching!

      (pause)

      and so on...

    2. JetSetJim Silver badge
      Headmaster

      Re: As could be expected....

      The CEO bonus may be well deserved if he's managed to convince the slaves to accept a £14bn write off of their pension value. :)

      I always thought that when you had a DB scheme in place you couldn't convert to different terms without the employees permission as that seems to be what my previous employer is trying to do. The worst you should be able to do is close it to new entrants and not accept more contributions. You could certainly offer to transfer it to another scheme, but the employee should not be under any obligation to do so, however big the funding shortfall is.

      Although if the shortfall is big enough to sink the company (e.g. Nortel), then perhaps taking the transfer is a good idea...

      1. Anonymous Coward
        Anonymous Coward

        Re: As could be expected....

        You only have to convince the trustees and half of them probably represent the company.

      2. Anonymous Coward
        Anonymous Coward

        Re: As could be expected....

        "if the shortfall is big enough to sink the company (e.g. Nortel),"

        Speaking of which, perhaps an update from El Reg on the current state of the former Nortel UK scheme would make a welcome addition to the usual press-release-derived stuff. These background paragraphs are from a press release too, a year or so ago:

        "Nortel Networks collapsed into insolvency in January 2009, with its European, U.S. and Canadian entities making simultaneous insolvency filings in London, Delaware and Toronto. Nortel’s business was hugely integrated, and there was much difficulty associated with realising assets on a country-by-country basis. As a result, the various insolvency office-holders worked together to sell the key assets and business units on a joint, global basis.

        Nortel’s UK group company (Nortel Networks UK Limited, or NNUK) was, at January 2009, the sponsoring employer of a large defined benefit pension scheme with more than 40,000 members. With a buy-out deficit of more than £2bn, the pension scheme trustee (and the UK Pension Protection Fund) was one of the largest creditors in the global insolvency. "

        from

        https://www.pwc.co.uk/press-room/press-releases/Nortel-pension-scheme-settlement-approved-by-Courts.html

      3. Steven Jones

        Re: As could be expected....

        They haven't persuaded the union to take a £14bn write-down. That's simple nonsense. The £14bn deficit isbased on current known liabilities alone. That's something like 300,000 pensioners, mostly current, some deferred. Those benefits are locked into law and cannot be changed.

        The deal is more about stopping the deficit getting worse.

        1. JetSetJim Silver badge

          Re: As could be expected.... @Steven Jones

          That's the point I was trying to make - the article seems written from the perspective of the entire pension being transferred to something with a lesser benefit for the members of the scheme, rather than closing it to new contributions and members and putting into place a plan to close the £14bn shortfall while pushing current contributors onto a new scheme which royally shafts them in terms of defining the benefit they will receive on retirement (although it's still better than a completely defined contribution scheme with absolute minimum contributions from the company, at least).

      4. Anonymous Coward
        Anonymous Coward

        Re: As could be expected....

        > "I always thought that when you had a DB scheme in place you couldn't convert to different terms without the employees permission"

        Accrued benefits are fixed (protected), but they can close the scheme to new contributions

    3. Anonymous Coward
      Anonymous Coward

      Re: As could be expected....

      This will be and is endemic of Europe.

      Say bye bye to everything you have known.

      Pray the kids can fight the globalists.

  3. Neil Barnes Silver badge

    I suspect that there will come a time

    when the main aim of a company will not be just the bottom line, but the support of the people whom they employ. The current fashion for zero hour contracts and short-term employment simply isn't stable. A pension fund is a *big* part of an employee's recompense, and changing it at any time should damn well be illegal. *First* the pension fund; *then* the dividends.

    Yes, I know a lot of the reasons why a lot of companies were required to take pension fund holidays. Nonetheless, this is not a surprise; longer living pensioners and low interest rates have been predicted/observed for years - so why has nothing been done about it?

    1. J27

      Re: I suspect that there will come a time

      That day will be after every employee is wise to the whole thing and willing to switch employers at the drop of the hat. I'm already seeing it in the tech industry, companies are going out of their way to provide better benefits to entice qualified employees. They can only get away with what their employees are willing to put up with.

      1. Commswonk Silver badge

        Re: I suspect that there will come a time

        They can only get away with what their employees are willing to put up with.

        That's true enough, but in many instances we are seeing long standing DB schemes whose members have been working for their employers for years suddenly finding that the music has stopped and that they are all required to transfer to a DC scheme for the rest of their working lives with reduced retirement benefits. At that point there is nowhere to go; they are stuck with it unless they can find another employer with a continuing DB scheme, which these days is increasingly unlikely.

        1. Richard 12 Silver badge

          Re: I suspect that there will come a time

          Nobody has offered a Defined Benefit pension for years.

          They're all long closed to new employees, these are all people who've worked for BT for decades.

          1. J27

            Re: I suspect that there will come a time

            That's a good point, I don't recall a time when anyone offered a defined benefit scheme. Maybe I'm too young,

            1. Roland6 Silver badge

              Re: I suspect that there will come a time

              >I don't recall a time when anyone offered a defined benefit scheme. Maybe I'm too young,

              Or don't work for the government...

            2. tony2heads

              Re: I suspect that there will come a time

              @J27

              They definitely did exist once -my father in law had one. The are thought to be extinct but may still exist, like the coelacanth, in obscure parts of the world.

            3. Steven Jones

              Re: I suspect that there will come a time

              Try working in the public sector. Defined benefit schemes are pretty well universal (not, of course, if you work for one of the service companies working into the public sector).

          2. John Smith 19 Gold badge
            Unhappy

            Nobody has offered a Defined Benefit pension for years.

            Indeed.

            I think BT may have been one of the last to offer it.

            Blame that nice Mr Gordon Brown for doing this.

            1. Doctor Syntax Silver badge

              Re: Nobody has offered a Defined Benefit pension for years.

              "Blame that nice Mr Gordon Brown for doing this."

              Three times over, well, to be fair (to Gordon Brown? What am I writing?) maybe 2 1/2.

              1. Taxing income from pension scheme investments.

              2. Being in charge when his tax officials insisted on companies taking a contribution holiday on account of the scheme being at risk of being over-funded.

              3. Running a hugely stupid economic policy that didn't see house prices as inflationary, resulting in stupidly low interest rates, huge debts, economic collapse and the imposition of even lower interest rates which continue because nobody will take the economic risk of hoiking them up again. I recall that at that before the collapse he was prancing on the world stage (Tone emulation?) berating those who wouldn't do likewise that they should join the UK & US in this wonderful economic policy.

              1 lead to pension scheme incomes falling from investments and 2 from incomes falling from contributions. 2 was predicated on assumptions about the returns of annuities on which the valuations were based. 3 torpedoed those returns (which are based on interest rates) because it made the assumptions turn out to have been wildly optimistic. Add to this the positive feedback loops between pension scheme effects on share prices and share prices on pension schemes.

              For which shenanigans Borwn is now paid a pension from the grateful British public and got a University teaching job and various economic advisory roles; fair enough providing he teaches "what I learned from my mistakes".

              Meanwhile pension schemes in general, not just BT's, have been blighted for keeps.

              1. Charlie Clark Silver badge

                Re: Nobody has offered a Defined Benefit pension for years.

                Running a hugely stupid economic policy that didn't see house prices as inflationary

                This has been UK government policy for decades because equating price with value is a vote winner.

            2. Anonymous Coward
              Anonymous Coward

              Re: Nobody has offered a Defined Benefit pension for years.

              It's true. I started in one of BT's subsidiaries and was placed onto DC pension. My colleague was in BT proper and on one of the last final salary schemes. The pension difference is staggering over all those years. I'll get around £8000 per annum from mine whereas he'll get £20,000. I'm glad the union fought for all those employees to not go fully DC - the standard life pension is a bit poor in my opinion (especially annuity).

              1. Roland6 Silver badge

                Re: Nobody has offered a Defined Benefit pension for years.

                I started in one of BT's subsidiaries and was placed onto DC pension. My colleague was in BT proper and on one of the last final salary schemes. The pension difference is staggering over all those years.

                It would be interesting to know if the contributions (employee and employer) were identical. Also when the monies were remitted to the (DC) scheme. One of the reasons I've never used payroll FSAVC scheme operated by the employer is because the employer doesn't have to pay the FSAVC contribution on payday, whereas they do have to put my net salary into my bank account on payday. With DC scheme (as with other regular savings) putting a regular amount in each month can make a big difference compared to periodically making lump sum investments.

                However, there is another side to this: My children have investment accounts with the same provider, set up on the same day (both sent in the same envelope) with the same initial investment and subsequent contributions being made into each, yet one is doing much better than the other... Given there is no life insurance element to this investment, go figure...

                The other aspect of the DC scheme which you allude is the gamble on annuity rates prevailing at the time of your retirement. I think the BT hybrid scheme does try to manage some of the risk of the DC scheme by the DB underpinning. What I would be looking at is what is in place to ensure that when the closed DB scheme goes into surplus, the surplus gets distributed to the DC scheme members.

        2. Roland6 Silver badge

          Re: I suspect that there will come a time

          > they are all required to transfer to a DC scheme for the rest of their working lives with reduced retirement benefits.

          That depends...

          A friend was due to qualify for his DB pension at 60, but he still had a mortgage and wanted to carry on working until 65. For him switching meant he got a further 5 years of employer pension contributions that he wouldn't have got under the DB scheme...

          Personally, working in IT and hence having a variety of pension pots, my DC pot from the 1980's has performed rather well and currently will deliver a better pension than if it had been a DB pot... I have my fingers crossed with respect to some of my DB pots as the funds are underfunded (fund covers less than 40% of liabilities) and hence hope the parent company continues trading (at least until I retire) so it can make up the shortfall...

    2. Steven Jones

      Re: I suspect that there will come a time

      Nonsense. What would be illegal would be wiping out accrued benefits. The change to the pension scheme for future contributions and members is not the same thing at all. Yes, there may be a new employment contract to sign, but that's it.

      Many, many companies have closed their defined benefit systems, even to current members, albeit protecting accrued benefits of course. With reduced returns and increasing life expectancy, these schemes have turned into a bottomless pit which only the government can afford (they have the useful ability to tap tax payers).

      Defined benefit pension schemes have all but disappeared from private companies for this reason. In large part, because the past actuarial calculations were wildly wrong and had long been far too optimistic. There's certainly a scandal there which nobody has ever researched as to how the actuarial tables were manipulated.

      1. Anonymous Coward
        Anonymous Coward

        Re: I suspect that there will come a time

        > Defined benefit pension schemes have all but disappeared from private companies for this reason. In large part, because the past actuarial calculations were wildly wrong and had long been far too optimistic.

        Or pessimistic. Also, DB schemes appear on the balance sheet as a liability, which can affect credit-worthiness. DC don't.

      2. Anonymous Coward
        Anonymous Coward

        Re: I suspect that there will come a time

        When I worked as an actuarial analyst, many of my clients told us what assumptions to use. These were often wildly optimistic, with assumed duration of retirements shortened by a third, assumed long-term investment rates of 8%, and so on... and this was after the 2008 financial crash.

        Thus it would look like they had 95% funding, which could be easily resolved in a few years, whereas their true funding was nearer 60%. We argued, but lost.

        Perhaps worse was when one client reduced the accrued benefits for deferred pensions (future pensions for those who have left the employer). We told them they couldn't do that, so they ignored us and asked their lawyers. Their lawyers agreed with us - so they fired them and got new lawyers.

        Anon, for confidentiality protection

    3. LucreLout Silver badge

      Re: I suspect that there will come a time

      *First* the pension fund; *then* the dividends.

      The problem with that logic, is that the vast majority of shares owned in the FTSE 100 are owned by pension schemes. The dividends ARE the pension fund.

      DB schemes are simply too expensive to fund, and there's no reason for investors to hold shares in a company (ie to own the company) if they're going to come after the staff in terms of consideration.

      I realise those facts won't be popular in these parts, but that doesn't change the point that they are facts, not opinions.

      1. Anonymous Coward
        Anonymous Coward

        Re: alternative facts

        "the vast majority of shares owned in the FTSE 100 are owned by pension schemes. "

        Is that what's caled an alternative fact? Here's some evidence-backed data that someone prepared earlier on behalf of UK taxpayers.

        The Office for National Statistics, aka ONS, do a report every few years on who really owns UK shares. Readers should look it up and see for themselves where shares are *really* owned. I'm not going to provide a link just now, some people might learn something on the journey.

        The vast majority of UK working folk never had a real pension, and of those that did, they typically weren't exactly well paid or well funded (sometimes you had to look very carefully to find that out).

        Given that the total book value of UK shares is very roughly £2 trillion (2016 report), where's the rest of the money? The ONS know, as do the people who take the trouble to find the facts.

        According to the ONS reports, pension funds own less than 5% by value of UK shares (varies a bit from report to report).

        Rest of the world are typically at the top of the chart with more than half (by value) of UK shares.

        Next is UK individuals with roughly 10% by value.

        Below that. but above UK pension funds, come UK Unit Trusts, other financial institutions, and insurance companies, with a total of around a quarter of the value of UK shares.

        "I realise those facts won't be popular in these parts, but that doesn't change the point that they are facts, not opinions."

        See above.

        "DB schemes are simply too expensive to fund,"

        Your opinion, and that of many of the corporate beancounters. Doesn't make it a fact.

        On the other hand, ONS figures (with sources) appear to be facts.

        "

        1. LucreLout Silver badge

          Re: alternative facts

          Is that what's caled an alternative fact?

          No, it's what's called an actual fact. Posting anonymously in the hope of gaining a credibility that does not accrue to your username does not help if all you post are the usual half baked fictions and ill reasoned views.

          Here's some evidence-backed data that someone prepared earlier on behalf of UK taxpayers.

          The Office for National Statistics, aka ONS, do a report every few years on who really owns UK shares.

          You do realise that the UK bit of your sentence is the important part, and that the reason why you're struggling to comprehend my post is because you've conflated what I said about pension schemes with UK pension schemes, which is not what I said. You understand the idfference and are able to follow now, yes?

          According to the ONS reports, pension funds own less than 5% by value of UK shares (varies a bit from report to report).

          You do realise that there is vast pension investment that does not constitute a pension fund, yes? Anyone with a SIPP may have their pension invested in the FTSE without it being in a fund. You're obviously not very financially literate, so you're going to need to go away and start to learn a few things.

          Rest of the world are typically at the top of the chart with more than half (by value) of UK shares.

          And the rest of the world is made of of what? Oh yes, pension funds, pension savings, and other wealth management vehicles.

          Next is UK individuals with roughly 10% by value.

          Well yes, but that an individual holds shares directly does not imply they are not intended as retirement savings. I have no other aims for my direct investments - their only purpose is to provide a retirement income outside of the pension wrapper such that I can control when I retire, rather than having some civil servants forever bumping up the age threshold.

          above UK pension funds, come UK Unit Trusts, other financial institutions, and insurance companies, with a total of around a quarter of the value of UK shares.

          Most of my ISA investments are unit trusts, but they are very much the driver of my retirement savings since the last age increase was announced. Again, you've completely misunderstood the difference between the purpose of the investment and the type of investment vehicle or wrapper which contains it.

          Frankly, in your rush to disagree with me you've misunderstood everything I posted, revealed you know little to nothing of fincial matters, and ended up looking decidedly foolish. You really are turning into the gift that keeps on giving.

          1. Anonymous Coward
            Anonymous Coward

            Re: alternative facts

            > "You do realise that the UK bit of your sentence is the important part, and that the reason why you're struggling to comprehend my post is because you've conflated what I said about pension schemes with UK pension schemes, which is not what I said"

            You said "FTSE-100", which is solely UK. You're also commenting on a UK-based site. Without any qualification otherwise, the inferrence is obvious.

            1. LucreLout Silver badge

              Re: alternative facts

              You said "FTSE-100", which is solely UK. You're also commenting on a UK-based site. Without any qualification otherwise, the inferrence is obvious.

              Nope, sorry, still wrong. The vast majority of earnings in the FTSE 100 are derived from abroad, so no UK focus there, and the largest ownership share since the early 90s is abroad, thus again no UK connection.

              I specifically avoided the term "UK pension funds" because ina globalised world it makes no sense at all for them to focus predominantly on the UK index. The vast bulk of my own pension wrapper contained pension fund investments are in emerging markets, because that is where the growth is, not the UK.

              Your inference, and by convention everything following from it, is incorrect.

              Foreign investment in Britain has soared as the ROTW has grown wealthy because we have a stable legal and regulatory system that respects property rights, and because diversifying outside of their own market is a great way to preserve their wealth. If you live in Venezuala you've watched your wealth be sequestered and destroyed by socialism, unless you had some, most, or all of it abroad. The FTSE is a great place to hold that wealth in a an offshore entity where your domestic politicos and state organs can't touch it.

              You're obsessing about the wrong part of my original post. It simply doesn't matter in what vehicle a company is owned, it matters that it is owned. The employees work for whoever owns the company - the capital is always more portable than the employees, and thus the owners will always be rewarded before the staff, including their pension fund. Depending on your moral viewpoint and ethical framework, that may be just peachy or it may be a disgrace; that doesn't matter, because it just is how the world works.

  4. LeahroyNake Bronze badge

    Everyone else

    Gets state pension or whatever they have managed to put into a private or forced contribution scheme.

    My company stopped offering the good version / match up to 10% when the basic became compulsory.

    1. Lee D Silver badge

      Re: Everyone else

      Because generally speaking most pensions are unsustainable. That pension has been around for how long? And already it's in trouble. You can pull all the numbers you want, and claim mismanagement, etc. but 14bn is a BIG hole.

      It's just not sustainable to pay in a tiny portion of your income, expect to retire in your 60's, and then live off a wage which is anywhere near useful. Maybe it used to be. Maybe for some it can still be. But in general, and today, no. Almost all of us will live to pension age. Yet the percentage we contribute is still only a fraction of that required to pay anything approaching a wage.

      I was talking about this in work today, with someone in their 50's. They'll get a pension that they could - in theory - live on. They can only afford to do so because they rent from the council, so will likely get housing benefits etc.

      I, in my 30's, will need to work until nearly 70 and then state pension and the pensions I've paid into will produce... well, basically nothing once you take into account inflation. It wouldn't pay rent on a 1-bed flat within 50 miles of Greater London, before I even considered anything like bills, tax, food, etc.. Lots of people my age are in similar positions. P.S. I have full contributions on NI etc.

      But is my pension terrible? I work for private schools. It's actually quite good. What kills it is things like house prices and inflation. I just split up with my ex, after only four years our house was worth £100k more than we bought it for. i.e. if we'd left it four years and tried to save up more, we wouldn't have been able to buy it. What can I afford now? Nothing without renting.

      Now the bank would give me a mortgage. For £180k. Over 35 years (which would take me past retirement, technically). And £180k wouldn't really buy me a one-bed flat / mousehole inside the M25 (which is the only way to earn the money I do). And to do that I'd pay as much as I pay currently to rent a two bed flat with parking and decent size rooms in a fairly nice area.

      So my choices are damn limited, come retirement. Pretty much I'm screwed. I can either live in a hovel until I'm 68 (probably 70+ by the time it comes round), and put all my spare cash into a pension and then live... an okay life after retirement. Or I can live normally for the moment and be screwed come retirement, unable to afford to pay off any mortgage I might start in the meantime, or rent to live. That's, of course, assuming I'm healthy enough to work until retirement.

      And then people wonder why people choose not to work, why the housing market is just going mad, and why the next generation (arguably even worse off than I would be) aren't bothering to save for the future. And yet pensions are one of the major categories of government expenditure. Only about 1/3rd of military spending, but that's another discussion.

      I'm not ungrateful, I live in a civilised society where if I break my leg I probably won't die or go bankrupt, and the fact that there is a pension at all is relatively civilised.

      But the maths don't add up. As time goes by, they invariably worsen. And with 30+ years of inflation they definitely won't add up. And there aren't enough houses for me to own one in order to cushion the blow (like my parents who paid £10,000 for a house that's now worth £500,000 - my dad bought a house at 20 that I can't afford when approaching 40).

      Given that I've never not-worked a day in my life, never claimed a single benefit for even a minute, and neither have my parents, that's quite a bit of suckage. It's depressing to even think about. And literally the only thing I can afford to do about it is... well... nothing. I'm half-tempted to just stop all pension contributions whatsoever. Someone else will enjoy my money as it is, whereas I could probably benefit more from it today if I put it elsewhere.

      If I'm lucky I might be able to buy a small house in the middle of nowhere (i.e. nowhere near anywhere I've ever lived) and live out my days far from any kind of city, and afford to be able to live. If I'm not... well, I'm screwed.

      Just do the maths on your pension and what you need to earn when you retire, and what your house will be worth, and what you'll get back. Now factor in ANYTHING - a divorce (splitting a house), living alone, job loss, career stagnation, further housing inflation, etc. Most likely it's nowhere near as rosy as your grandparents (mine all lived out their retirement on pension without too much hassle) or your parents. But your kids are screwed, as are your grandkids unless something drastic changes.

      1. Anonymous Coward
        Anonymous Coward

        Re: Everyone else

        Ah there's you issue, you got married, had kids and divorced.

        No one tells you that if you divorce after a certain age, (dependant on your location) you are pretty much fucked, doubly so if you have kids.

        I have the joys of (attempting) to buy a house in my late 40's similar to what I bought 20 years ago i.e. a crap hole in a a crap location and ripping it apart and rebuilding it piece by piece.

        I choose the "cheaper" option of handing over the old house and having my pension touched.

        Grumble, moan , rant.

      2. LucreLout Silver badge

        Re: Everyone else

        I, in my 30's, will need to work until nearly 70 and then state pension and the pensions I've paid into will produce... well, basically nothing

        Apologies Lee, but if you're in your 30's you're going to work a lot later than 70. When I started my private pension provision I was entitled to take any accrued benefit at the age of 50. That is now already going to be 58, and that is for my private pension - whatever is left of it after Gordon Brown raped it ragged. My state pension will likely continue to roll further away from me at a faster rate than I age.

        Well deserved mistrust of pensions is what drove people into seeking alternative pension like arrangements such as BTL property etc.

        1. Anonymous Coward
          Anonymous Coward

          Re: Everyone else

          You only need to work until a stupid age if you don't start planning now. I won't get a state pension until I'm 67, but I'm sure as hell not working beyond age 60.

  5. handleoclast Silver badge
    Headmaster

    Staunch

    I realize that English dictionaries are descriptive, not prescriptive, and so eventually condone gross misuse (such that "cleave" became its own antonym) but...

    It's "stanch" not "staunch."

    Just a staunch pedant trying to stanch the flow, here...

    1. Chris G Silver badge

      Re: Staunch

      Stanch is a N.American use and not used in the UK.

      This is a UK news item.

      1. handleoclast Silver badge

        Re: Staunch

        @Chris G

        Stanch is a N.American use and not used in the UK.

        From the Oxford Popular English Dictionary, 1998 edition (one I happen to have to hand):

        stanch /sta:ntſ/ v.t. to stop the flow of (blood etc.); to stop the flow from (a wound). [f. OF estanchier]

        That is the entire entry. Nothing about it being Merkin usage, which is what it would say if, indeed, it was mainly Merkin usage. Nothing about it being archaic, either.

        Online dictionaries (less trustworthy, IMO) say the same. Although many of them mention that "stanch" is a Merkin variant spelling of "staunch."

        Would you care to provide sources backing up your claim?

  6. Anonymous Coward
    Anonymous Coward

    Feel sorry for BT

    There must be hundreds of thousands of "ex-GPO" and "ex-British Telecom" types still around enjoying their retirement from working on the Strowger. That's a hell of a legacy.

    1. Tom 7 Silver badge

      Re: Feel sorry for BT

      The NCB had the better idea of killing them at work or soon after.

    2. Steven Jones

      Re: Feel sorry for BT

      Last time I looked, there are something over 300,000 BT pensioners, current or deferred. Many will date back to pre-privatisation, when there were about 260,000 UK employees (about three times the current number).

      Should BT go insolvent, the pensions are covered by the "Crown Guarantee", which the government put into the privatisation bill, largely to avoid union conflict at the time.

  7. TrumpSlurp the Troll Silver badge
    Trollface

    Defined Benefit?

    Not for the plebs these days.

    However I suspect that members of both houses may still be sorted, and many Director level pension schemes may be generously funded.

    Did I read that there was a Carillion scheme for the directors which was still healthy or did I just imagine it?

  8. Oengus Silver badge

    Why the shortfall...

    I was in a defined benefit scheme with a former employer (how I miss that scheme). In the early days the company paid the entitlements to the Super fund. It got to the stage where, due to the rules of the fund and good investment choices, their DB fund was so over funded that the Super fund requested the company stop contributing to the fund. The actuary for the fund has determined that the fund is so over capitalised that their liabilities will never get to their reserves. It is so over-funded that the company doesn't need to make contributions for current employees (Non-DB) to meet the Australian Super Guarantee legislation requirements.

    The number of companies that decided that they would be able to meet spiralling pension costs from revenue and decided not to put aside the correct capital is growing. The shortsightedness of these companies is now biting hard and many are struggling and forcing their employees to take ever greater cuts to their entitlements.

    1. Charles 9 Silver badge

      Re: Why the shortfall...

      Force? What happens if they refuse and can't be summarily terminated without a visit from the lawyers?

      1. Anonymous Coward
        Anonymous Coward

        summarily terminated

        Pension schemes to start hiring hit-men soon? I wonder what the pension scheme for a hit-man is ?

        1. wolf29

          Re: summarily terminated

          Short-term thinking naturally leads to short-falls in long-term initiatives. I reckon there will be an uptick in employment in the geriatric-hit field as soon as next Thursday. Watch the "help wanted" advertisements.

          The obvious answer for the company is to sell out, and the new owner can sue to get the stagnant funds (unrelated to a living person) in the pension bucket out to pay for the purchase. This was how Bain Capital and other equity vultures operated, as I understand. The stagnant funds could be used to fund the ongoing pensions of currently living persons, but one way to claim a shortfall is to exclude such stagnant funds from your report as distributable. The stagnant funds are still accruing interest in the fund, but the money will never be distributed to pensioners. There could be billions in the fund that are being conveniently ignored to make the claim of an imminent shortfall.

        2. Wandering Reader

          Re: summarily terminated

          Pension schemes to start hiring hit-men soon? I wonder what the pension scheme for a hit-man is ?

          "Don't worry about it. Someone will come round to sort you out later"

    2. Doctor Syntax Silver badge

      Re: Why the shortfall...

      "The actuary for the fund has determined that the fund is so over capitalised that their liabilities will never get to their reserves."

      Australian regulation may be different but in the UK such determinations are made by HMG. HMG has always been a bit optimistic - or maybe pessimistic in terms of estimating life span. They instituted public and state pension schemes which are basically Ponzi schemes - pay now, get paid later except that the pay now part was actually paying existing beneficiaries an the get paid later bit would come from other people's payments. And just don't look at the fact that pay now and get paid later all goes via the general taxation pot. With reasonably pessimistic estimates of life span this was supportable - you'd pay now for your working life and get paid later for a few years if you were lucky.

      In contrast because private or occupational pension schemes attracted tax relief (one of Gordon Brown's stealth taxes was to reduce this) they tend to get treated as tax scams. Schemes are rated as overfunded based on optimistic forecasts for annuity returns and these aren't going to return to the forecast levels until interest rates go up - if they ever do.

  9. Richard 81

    "Pen-sun"? "Ree-tyre"?

    What do these strange, archaic words mean?

    1. Thoguht Silver badge

      A pensioner explains

      "Pen-sun" is when you are writing nostalgically about foreign holidays you've had in the past and will never be able to afford again, and "ree-tyre" is what you shout when the man from Kwik-Fit shows you the bill.

  10. Anonymous Coward
    Anonymous Coward

    if you are young, then

    I'm still on a DB, I narrowly avoided the BT scheme by randomly working for C&W instead, and finally by escaping the UK, when I'd had enough.

    First expat was to NL, where the pensioenfondsen woningbedrijf (pension fund housing company) provided me with a nice rental house - seems the wily Dutch didnt tax their pension funds but used them to build loads more houses, hence affordable rents AND a flat rate pension much greater than the UK - which is apporoaching Mexico in terms of payout c.f. Melbourne Mercer Global Pension Index , Netherlands vs. UK, for example (2015) from http://researchbriefings.files.parliament.uk/documents/SN00290/SN00290.pdf

    or 2017 here https://www.globalpensionindex.com/overall-index-results-2017/

    UK seems slightly below average, NL, Oz look interesting.

    Now I've moved into a tech job for a government and they do still have a DB, (which is regularly trimmed every decade or so, it *is* available to new employees) gives me retirement at 63 (currently) and about a 70% of final salary as the DB, after 35 years of contributions.

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