BT 2011 Annual Report Download - page 138

135BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Retirement benefit plans continued
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.
Other features of the February 2010 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.
•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.
Since the valuation date the scheme’s assets have increased by £5.8bn and the Trustee’s initial estimate is that if the funding valuation was
performed using the same methodology at 31 December 2010 the deficit would have been around £3.2bn on this prudent valuation basis,
after allowing for the £0.5bn deficit payment made in March 2011.
The Pensions Regulator’s review of the 2008 BTPS funding valuation and recovery plan is now on hold and not expected to recommence
until the outcome of the final Court decision, including any potential appeals, is known on the Crown Guarantee. We do not expect this to be
before the completion of the next triennial funding valuation as at 31 December 2011. As is usual, BT and the Trustee will engage with the
Pensions Regulator regarding the 2011 valuation.
Payments made to the BTPS
2011 2010
Year ended 31 March £m £m
Ordinary contributions 266 384
Deficit contributions 1,030 525
Total contributions in the year 1,296 909
The group expects to contribute approximately £135m to the BTPS in 2012, being ordinary contributions only, as the deficit payment due in
December 2011 was paid early in March 2011. The expected payments are reduced by £110m to recover overpayments of ordinary
contributions paid in 2010 before the reduced rate of regular contributions was announced in February 2010.
Other protection of BTPS member benefits
If the group were to become insolvent there are additional protections available to members:
•the Crown Guarantee which was granted when the group was privatised in 1984 and applies upon the winding up of the group. The scope
and extent of the Crown Guarantee is being clarified by the Trustee through the courts. The decision of the High Court issued in October
2010 was that the Crown Guarantee is not limited to those who were members of the scheme at the date of privatisation and that
members who joined after privatisation are also capable of being covered. The Court confirmed that any payments to be made by the
Government must be measured on an annuity basis. It was decided that the Crown Guarantee does not cover the benefits of members
accrued while in service with companies that participate in the BTPS other than BT if the member concerned had not previously been
employed by BT. The judgment was the first stage in the case and leaves further issues to be considered at future hearings and/or appeals.
Until these issues are finally resolved it is not possible to say with complete precision what the scope of the Crown Guarantee is.
•the Pension Protection Fund (PPF) may take over the scheme and pay benefits to members not covered by the Crown Guarantee. 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.
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