BT Group has been hatching plans for wriggling out of old promises to staff on a defined benefit pension scheme – which pay out to employees based on (a) years of service and (b) career-average earnings and/or final salary. These are extremely nice pensions to have but having persuaded people to join businesses on the back of these pledges, companies now argue that they are unaffordable.
Pensions are wages deferred and if employers don’t deliver on the pay packets previously promised to staff, it’s conceptually no different from cutting somebody’s salary.
During the 1990s the trustees running the BT pension scheme believed it to be so well-funded that the company stopped making contributions.
When an employer tries to renege on promises to pay a certain retirement income, strangely, however, the bosses always seem to be on slightly different deals and suffer much less pain.
Earlier this month, the high court rejected BT’s latest proposal to change its defined benefit pension payouts, after the company tried to link increases to the consumer price index of inflation, rather than the retail price index, which tends to be higher.
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