UK  - The BT Pension Scheme (BTPS) has announced a 55% reduction in its deficit as a result of the switch to the consumer price index (CPI).

BTPS, which at the end of September reported a funding shortfall of £5.2bn (€6bn), said the move away from the retail price index (RPI) would cut the scheme deficit by £2.9bn.

The company said: "Due to the scheme's history, many of the scheme rules reflect those of public sector schemes, and so the increase set by the government automatically applies as detailed above. No further legislation is required, and the scheme rules remain unchanged."

BT added that the reduction would not change the recovery plan agreed between trustees and the company, under which it will make payments of £525m both this year and next.

Under the scheme rules, members are currently divided into two groups, with any employees who joined before March 1986 immediately being affected by the change.

As a result, members who fall into categories A and B will see their pensions in payment - as well as the future revaluation of pensions - linked to CPI.

Workers falling into category C - meaning they joined the scheme after March 1986 - will continue to have their pensions linked to RPI until both BT and trustees have completed a review detailing their options.

Trustees of BTPS recently went to court to clarify the extent of the crown guarantee, which stated the government would step in to cover the company's pension obligations should it become insolvent. The guarantee stems from a time prior to BT's privatisation.

The court case concluded the government would be required to cover the bulk of pension payments should the telecoms company become insolvent.

The current deficit of £5.2bn, now reduced to £2.3bn when taking the shift to CPI into account, has already fallen dramatically from June this year, when it stood at £7.6bn.

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