UK telecoms giant BT plans to cut indexation for thousands of its pension scheme members as it seeks to address a funding shortfall of £8.8bn (€10bn).

The company has agreed in principle with the trustees of the £50.8bn BT Pension Scheme (BTPS) to switch its inflation measure from the retail prices index (RPI) to the consumer prices index (CPI).

However, BT has referred the case to the High Court to get clarification that it is able to make the change within the scheme’s rules.

In the UK, CPI is generally lower than RPI, meaning inflation-linked benefit increases would be lower. Earlier this month, Dairy Crest said it had made a similar change to indexation rules for its £1.1bn scheme.

Indexation changes have been proposed as one of a number of measures to ease the pressure on underfunded UK schemes, but some pension funds’ rules do not allow such a change.

A spokesperson for the BT Group confirmed: “As part of the pensions review, we’re reviewing the use of RPI as the index for calculating increases to pensions in payment for Section C members in the BT Pension Scheme, and liaising with the BTPS trustees about this.

“The scope of this review includes the future increases received on benefits already built up in the BTPS, including by Section C members who have left BT and those who are currently receiving a BTPS pension.

“Having agreed the approach with the trustees, we are seeking clarity, through a court application, on whether it’s possible to change the index.”

Section C has approximately 80,000 members. It was set up in 1984 when BT was privatised, and provides final salary-linked benefits for members who joined before 1 April 2009. Since that date the scheme switched to a career average basis. It was closed to new members on 31 March 2001.

Section C members are entitled to an inflation-linked uplift every year subject to a 5% cap, according to workers’ union Prospect. Sections A and B of BTPS already use CPI as their inflation measure.

According to BT’s annual report for the 12 months to 31 March 2017, the pension scheme had a shortfall of £8.8bn. However, a scheme funding update issued by the trustees earlier this year put the deficit at nearly £14bn as of 30 June 2016.

In May this year BT announced it was investigating a potential contingent asset deal with scheme trustees as another option for reducing the deficit. BT has already set out a funding plan involving contributions of more than £2.8bn between 2018 and 2021, and a further £4.9bn by 2030.

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