BT Pension Scheme: Age Discrimination
28 March 2009
Following the introduction of the Age Discrimination legislation in 2006 supplementary guidance was issued in relation to pension schemes that included a large number of opt outs and qualifications to the original Regulations. Since that time the CWU has been discussing the implications in relation to the BT Pension Scheme (BTPS).
The T&FSE has been keenly aware that any failure to abide by the Regulations may expose the BTPS to legal challenge with possibly severe financial consequences for the whole Scheme. At the same time the union has been seeking to resolve some issues created by the changes associated with BT Pension Simplification.
The TFSE has reached agreement with BT on a number of changes that are detailed below. BT will announce the changes followed by emails and letters sent to BTPS members.
Pension Accrual and Member Contributions Ceasing Before the Age of 60
At the moment individuals who reach 40 years pensionable service before 60 can only accrue extra pensionable service after age 60. We have been pressing BT to end this anomaly.
BT has now agreed that members who have reached 40 years pensionable service before the age of 60 will have the following options:
- continue to contribute and accrue further pensionable service;
- draw their pension which would be subject to a reduction on account of early payment;
- opt out of membership and defer receipt of their pension - the eventual pension would be based on the pension calculated at the date of opting out plus pension increases in deferment. This alters the current practice where the pension is based on the final salary at the date of eventual retirement. Once this option is taken a member would not be able to revert to normal membership of the BTPS.
Members who have already ceased contributions and benefit accrual because they have accrued 40 years pensionable service will be given a one off opportunity to recommence contributions and build up more pension. In order to do this they must apply by 31 March 2008. BT will be writing directly to relevant BTPS members on this issue.
As a result of these changes the option of restarting contributions after age 60 will no longer be available.
Deferment of Pension After Age 60
BT has agreed to the Union's request that active members leaving the BTPS after the age of 60 but remaining in employment will be given the additional option to defer drawing their pension until such time as they leave service/retire.
In these circumstances a pension would be actuarially increased to reflect the period from age 60 to the date the pension actually commences. This actuarial increase will take account of the normal increases paid every year after age 60.
An individual who takes this option would be entitled to the death benefits appropriate to a deferred member as opposed to an active member.
This option will not be available to any existing deferred pensioners who have left BT.
Unreduced Early Retirement After Forty Years Service: Sections A/B
Currently Section A/B members who have accrued forty years pensionable service before the age of 60 who retire and leave the company may, subject to company consent, draw their pension on an enhanced basis - that it to say the usual early retirement reduction is not applied.
This option has been the subject of repeated members enquiries as members only have the option of the enhancement if they leave BT, if they work on and draw their pension (which has been allowed since pension simplification) the actuarial reduction is applied.
The current arrangement conflicts with the Age Discrimination Regulations, which stipulate that early payments (except in relation to redundancy or medical retirement) must be reduced and cannot be enhanced. Therefore, this option has to be discontinued.
However, the change will not be implemented until 31 March 2008. After that date any pension paid before the age of 60 will be subject to the normal early retirement reduction. BT will be writing directly to relevant BTPS members on this issue.
This change will come as a big disappointment to those members hoping to leave under this rule, but the rule has always subject to the discretion of BT, and the new legal framework means that this option cannot continue.
Closing the BTPS Sections
At the moment in certain circumstances individuals can still join the BTPS as part of a TUPE acquisition.
Under the Age Discrimination Regulations discrimination cannot occur if a Section of a pension is closed to staff that have not already joined it. A closed Section gives protection against claims that staff in other Sections or pensions are treated differently on the basis of their joining date and so their age. Therefore, all Sections will be closed permanently.
However, it may still be possible for individuals joining BT under TUPE arrangements to join the BTPS depending on the terms of the agreement between BT and the transferring employer. In this situation each such TUPE will form a separate closed Section of the BTPS.
This change will also have an impact on the current rights for Section A/B members who have left BT. Currently such members have the right to rejoin BTPS Section B if they rejoin the company at a future date. In future this option will only be available to those who left BT before 1 December 2006 - the effective date of the legislation.
Furthermore in the past BTPS Section C members who were TUPED out of BT had the opportunity to rejoin Section C if they returned directly to BT either as part of a TUPE or individually. This option will no longer be available unless an individual rejoins as part of a TUPE and it has been agreed by BT and the transferring employer.
The Trustee of the BTPS has taken the view that if a pension scheme rule is not age discriminatory but subsequently turns out to be discriminatory any benefit affected would be levelled down. However, BT has assured the CWU that if a rule is unexpectedly found to be age discriminatory BT will consult with the Union before making any change.