BT 2012 Annual Report Download - page 130

Financial statements
Notes to the consolidated financial statements
20. Retirement benefit plans
Background
The group has both defined benefit and defined contribution retirement benefit plans. The group’s main plans are in the UK and the largest by
membership is the BT Pension Scheme (BTPS) which is a defined benefit plan that has been closed to new entrants since 31 March 2001.
Subsequent to that date new entrants have been able to join a defined contribution plan, currently the BT Retirement Saving Scheme (BTRSS), a
contract based defined contribution arrangement.
Defined contribution plans
A defined contribution plan is a pension arrangement under which both the company and participating members pay fixed contributions into an
independently administered fund. Pension benefits for members of the plan are linked to contributions paid, the performance of each individual’s
chosen investments and the annuity rates at retirement. The income statement charge in respect of defined contribution plans represents the
contribution payable by the group based upon a fixed percentage of employees’ pay. The company has no exposure to investment and other
experience risks.
Defined benefit plans
A defined benefit plan is a pension arrangement under which participating members receive a pension benefit at retirement dependent on factors
such as age, years of service and pensionable pay. Benefits are determined by the scheme rules and are not dependent upon actual contributions
made by the company or members. The plan is administered by an independent trustee who is responsible for ensuring that the scheme is
sufficiently funded to meet current and future benefit payments and who must therefore agree with the sponsoring company a funding plan for
additional company contributions where it is estimated that the benefits will not be met from regular contributions and expected investment
returns. The income statement service cost in respect of defined benefit plans represents the increase in the defined benefit liability arising from
pension benefits earned by active employees in the current period. The company is exposed to investment and other experience risks.
BTPS
At 31 March 2012 there were 325,000 members of the BTPS. Members belong to one of three sections depending upon the date they first joined
the scheme. Section A is for members who joined before 1 December 1971, Section B is for members who joined the scheme between 1 December
1971 and 31 March 1986 and Section C is for members who joined the scheme on or after 1 April 1986 but before the scheme closed to new
entrants on 31 March 2001. The membership is analysed below:
Number of Number of
active deferred Number of Total
At 31 March 2012 members members pensioners membership
Sections A and Ba20,500 42,000 177,500 240,000
Section C 26,000 42,000 17,000 85,000
Total at 31 March 2012 46,500 84,000 194,500 325,000
At 31 March 2011
Sections A and Ba23,500 46,000 173,000 242,500
Section C 27,500 42,500 15,000 85,000
Total at 31 March 2011 51,000 88,500 188,000 327,500
aSection A and Section B memberships have been aggregated in this table as Section A members have typically elected to take Section B benefits at retirement.
Since 1 April 2009, when changes to member benefits and contribution rates were introduced, BTPS members have accrued benefits based upon a
career average re-valued earnings (CARE) basis and a normal pensionable age of 65. On a CARE basis benefits are built up based upon earnings in
each year and the benefit accrued for each year is increased by the lower of inflation or the individual’s actual pay increase in each year to
retirement. Benefits earned for pensionable service prior to that date are based upon a member’s final salary and a normal pensionable age of 60.
Under the scheme rules the bases for determining the rate of inflation for statutory minimum rates of revaluation and indexation of benefits are
based upon either the Retail Prices Index (RPI) or the Consumer Prices Index (CPI) which apply to each category of member as shown below:
Active members Deferred members Pensioners
Section B Benefits accrue on a CARE Preserved benefits are revalued Increases in pensions in
basis increasing at the lower before retirement based payment are based upon CPI
of RPI or the individual’s upon CPI
Section C actual pay increase Increases in pensions in
payment are based upon RPI
up to a maximum of 5%
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