BT 2010 Annual Report Download - page 134

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
132 BT GROUP PLC ANNUAL REPORT & FORM 20-F
29. Retirement benefit plans continued
Other features of the legal agreements with the Trustee for BT providing support to the scheme are:
In the event that cumulative shareholder distributions exceed cumulative total pension contributions over the three year period to
31 December 2011, then BT will make additional matching contributions to the scheme. Total pension contributions (including regular
contributions) are expected to be approximately £2.4bn over the three financial years.
In the event that BT generates net cash proceeds greater than £1bn from disposals and acquisitions in any 12 month period to
31 December 2011 then BT will make additional contributions to the scheme equal to one third of those net cash proceeds.
A negative pledge that provides comfort to the scheme that future creditors will not be granted superior security to the scheme in excess
of a £1.5bn threshold.
The intention is for there to be sufficient assets in the scheme to pay pensions now and in the future. Without any further contribution
from the company, it is estimated that at 31 December 2008, the assets of the scheme would have been sufficient to provide around 57%
of the members’ benefits with an insurance company.
If the group were to become insolvent, however, there are a number of additional protections available to members. Firstly, there is the
Crown Guarantee which was granted when the group was privatised in 1984. The scope and extent of the Crown Guarantee is being
confirmed by the Trustee through the courts. This applies, on a winding up of the group, as a minimum to pension entitlements for anyone
who joined the scheme before 6 August 1984, and to payments to beneficiaries of such persons. Secondly, the Pension Protection Fund
(PPF) may take over the scheme and pay certain benefits to members. There are limits on the amounts paid by the PPF and this would not
give exactly the same benefits as those provided by the scheme.
Under the terms of the Trust Deed that governs the BTPS, the group is required to have a funding plan that should address the deficit
over a maximum period of 20 years. The BTPS was closed to new entrants on 31 March 2001 and the age profile of active members will
consequently increase. Under the projected unit credit method, the current service cost, as a proportion of the active members’
pensionable salaries, is expected to increase as the members of the scheme approach retirement. Despite the scheme being closed to new
entrants, the projected payment profile extends over more than 60 years.
30. Share-based payments
The total charge recognised in 2010 in respect of share-based payments was £71m (2009: £141m, 2008: £73m).
The company has an employee share investment plan and savings-related share option plans for its employees and those of
participating subsidiaries, further share option plans for selected employees and an employee stock purchase plan for employees in the
United States. It also has several share plans for executives. All share-based payment plans are equity settled and details of these plans and
an analysis of the total charge by type of award is set out below.
2010 2009a2008a
Year ended 31 March £m £m £m
Employee Sharesave Plan 25 107 29
Allshare International 222
Employee Stock Purchase Plan 1–1
Incentive Share Plan 29 18 26
Deferred Bonus Plan 13 12 12
Retention Share Plan 123
71 141 73
aRestated for the adoption of the amendment to IFRS 2 ‘Share-based payment – vesting conditions and cancellations’. See page 94.
Share options
BT Group Employee Sharesave Plans
There is an HMRC approved savings related share option plan, under which employees save on a monthly basis, over a three or five-year
period, towards the purchase of shares at a fixed price determined when the option is granted. This price is usually set at a 20% discount to
the market price for five year plans and 10% for three year plans. The options must be exercised within six months of maturity of the
savings contract, otherwise they lapse. Similar plans operate for BT’s overseas employees.
Employee Stock Purchase Plan
The BT Group Employee Stock Purchase Plan (ESPP), for employees in the US, enables participants to purchase American Depositary
Shares (ADSs) quarterly at a price which is 85% of the fair market price of an ADS at the end of each quarterly purchase period.