BT plots to slash pension benefits for 32,000 staff BT has proposed closing its defined benefit pension scheme for 11,000 managers and slash contributions to 21,000 frontline staff in a bid to plug a looming £14bn pension deficit. The former UK state monopoly is set to begin a consultation with members of its two largest pension schemes tomorrow, The Reg has confirmed. The …
Most of the rest of the country has long lost these gold plated pension options. Why is it BT's customer's problem (1) to keep BT's staff in a far more comfortable retirement than those customers are likely to enjoy themselves?
1) Whether you say it comes out of profit or not, it is still paid by customers.
Most of the rest of the country has long lost these gold plated pension options. Why is it BT's customer's problem (1) to keep BT's staff in a far more comfortable retirement than those customers are likely to enjoy themselves?
Why so many downvotes?
Thanks to U.S. Capitalism®, the generation after Millennials won't have ever heard the word "pension".
Why so many downvotes?
The way I see it is that these people took on these roles and at the start they were told what their pension entitlement would be so you can then plan around that, if you want more then save or put more in. It was also probably a deciding factor when deciding what role to take. Historically though no longer the case public sector workers received less pay than the private sector (BT was public).
How would you feel if you worked for a company for 20 years to then be told sorry but that pension we agreed to pay is too much so were going to cut it? Especially when the shareholders have taken a lot more out than what it would cost to pay it.
Just because no one offers these pensions and the millennials won't get it doesn't mean they should get shafted.
U.S. Capitalism® isn't going to last forever people are starting to sit up and see just how shafted we truly are.
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None of these defined benefit schemes work as they are just a pyramid scheme that is destined to collapse. The only way to make them work is to have a pool of money that is separately managed and overseen which employers and employees pay into. A 'Gold Plated' scheme would then just be one where the employer pays in a significant amount more than the employee (or even the employee doesn't pay in anything).
Upon retirement the money is used to pay for your pension with the normal rules of a lump sum being available. The company should not be allowed to pause paying in to it or withdraw any capital out of it.
BT now have this mess to sort out and although some may say it is their fault at some point a company has to stop these defined schemes, if you stop it just for new entrants then you might be looking at liabilities for the next 80+years. In that time the workforce might be cut by half or more and the pension liabilities could bankrupt it potentially losing a lot more. If you're on a defined scheme in the private sector it's going to end, hopefully you can retire before them.
If you're on a defined scheme in the public sector then you may be safer as there plenty of people who can be forced to pay for it.
> None of these defined benefit schemes work as they are just a pyramid scheme that is destined to collapse.
Disagree. Looking at what myself any my employer pay into my DB scheme, and the returns on my (other) investments, I'm pretty sure I could generate a return sufficient to generate the provided pension (based on previous performance, obviously).
the generation after Millennials won't have ever heard the word "pension".
That's not true, the word "pension" will be around, just the meaning will change. It will refer to a deduction line item that goes to pay part of the interest on the debt generated when pension payouts were still a thing.
I, too, wonder how legal this is. If $EMPLOYER and I had a contract for a Final Salary pension, surely they're obliged to honour years earned to date even if they close it to new contributions?
e.g. after 20 years I've earned 20 80ths of my final salary and investment or company contributions should have to cover that up to my actual final salary after 40 years.
It's still better than the UK government on SERPs, State Second pension etc. where you get nothing back for anything you've paid over the basic NIC level.
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"it may be that the yearly increase added to your expected pension, as you head towards retirement, will be frozen."
I have a final salary pension from the first 16 years of my employment that ended when we got spun off into a separate company and. as observed elsewhere, TUPE doesn't cover pensions. However, on that pension the amount relating to the first 8-ish years has been frozen for the past 10+ years because at that point any increases were "discretionary" (laws requiring a capped cost of living increase only came in later) and as a result since the pension scheme is in deficit the trustees have been given legal opinion that it is unlawful for them to give any "discretionary" increases until the shortfall has been eliminated. That said, even with that the final salary based pension from my first 16 years is likely to be significantly higher than the defined contributions pension from the following 20 years!
I was part of a pension scheme where the employer (an investment firm) guaranteed a minimum 7% p.a. growth over the life of the investment and made non-contributory (on the employee's part) 18% of salary contributions to the pot. They got bought out and the parent company went bust. I'm not likely to get much back out of that one.
Personally I prefer the Australian concept of legally mandated 9.5% of salary goes into your pension pot which is then effectively a defined contribution scheme which can be invested where you want subject to constraints. It does create issues around sloppy and/or inefficient behaviour on behalf of the local investment industry that knows there's a lazy 9.5% of everyone's salary that has to go somewhere each year. There are also issues around self managed schemes becoming day-trading levels of risky. However I find the concept of the legal mandate better than the UK system of some people get a company pension, others do their own thing and there's now real mandate around how much needs to be put away so some do jack shit.
You are correct in saying most final salary schemes are non-contractural. It is usually phrased in an employment contract as the 'right to join the company pension scheme'. The terms and conditions can vary; in many cases they need to due to be flexible due to changes in legislation like equality laws etc.
However in the case of TUPE the new employer must offer an equivalent or better scheme. I am still remain a member of my previous employer's scheme (paid into by the new employer) as the new employer did not offer as generous a pension.
"It's still better than the UK government on SERPs, State Second pension etc. where you get nothing back for anything you've paid over the basic NIC level."
Glad someone else, other than me, feels this way. I didn't contract out, paid the extra and had it all, effectively, stolen in the "ponzi scheme" of state pensions.
As for BT - I was in a company brought into BT and was on the BT Retirement Savings pension... People who had joined BT at the same time as me got the final salary scheme. I can tell you know that the money purchase pension scheme gets you bugger all annuity from Standard Life. My £200K pot is just ~£4K/year. I'd have much preferred the final salary scheme. I hope the unions and employees fight the change.
And the reason these pensions which have informed the career choices people have made in the past keep disappearing is because of the "nobody else gets it" attitude.
Maybe if the attitude was "we all deserve a good pension more than shareholders deserve profits" then this shit wouldn't be happening.
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These schemes were generally well funded in the 1990s. Then people started living longer and longer, Gordon Brown's tax raid, low interest rates (even negative yields) etc. etc. Trouble is we don't have a crystal ball. It maybe these deficits will disappear in time, maybe they will get worse. However if the money just isn't there to pay the pension 20 or 30 years down the line, it doesn't matter what is promised now. That can apply to the public sector as well.
>>>Or perhaps they shouldn't have taken pension holidays....
HP did this, the b'stards. If fact their pension holiday went on for years and years to the dismay of the potential pensioners. Some, like me, had to make huge AVC's over the last few years with them just to stand still :-(
It should be illegal, you can't pay out to shareholders while shitting on the people making the money for them.
Will our illustrious government do anything about it? Absolutely not because most of them are the shareholders. That includes the Minister of State for Trade and Investment Ian Livingston who has 20m.
1) Start charging employees for bringing laptop and other bags into the office
2) Cut real estate expenses by moving employee workspaces closer together, since any international airline knows the average person is OK being in a confined space with 20 inches of legroom for 12 hours.
3) Form a queue at the office entrance, and charge those that want to be at the front of the line to enter the building early for the right to do that.
4) Employees who choose to be at the back of the line are still expected to produce the same amount of work as those at the front.
5) No lunch break or meal facilities, but a server with a cart comes by every couple hours to give employees a glass of water or juice and a bag of peanuts or pretzels.
6) Employees can also buy adult beverages, but they will need cash and it will cost them well above market.
Damn - you just reminded me of when I worked at Martlesham Heath Robinson. We had nice bar (for entertaining guests honest) and they used to do a fantastic pint of Adnams there from time to time.
I do miss the Friday afternoon tutorials where we used to share our cutting edge research amongst the group members after a couple of postprandials.
...and one of them turned up in my Inbox at coffee time this morning.
Earlier this year I declined BT's offer of an increase in speed of our FTTC service from 54 MB/s to 76 Mb/s at an increased price. The lower speed - even if reduced by any contention - was more than enough to meet our needs. As an (admittedly discredited) advertisement once said "Why Pay More?"
So BT's email turned up, telling me that the price was going to go up anyway, along with an unnecessary increase in speed to... 76 Mb/s. For those who want universal FTTP this is a foretaste of things to come; the paying customer is going to be royally gouged; I suggest that this price rise is nothing in comparison to what is going to happen if BT's idea of ditching FTTC (and the more basic ADSL service) is given Ofcom approval.
Thanks a lot, speed freaks...
Or just turn down the heating....
(I wish I was joking but I work in a bt building and heating being either roasting us when outside is brass monkey weather or colder than a witches tit in the height of summer. Anon natch.)
Well, here's the thing - you're welcome to make that offer to pay a fraction of what BT is asking, and they are at liberty to decline it and cancel your service.
Employees of BT have that same choice - if what BT are offering in terms of pay and benefits doesn't properly reflect your value, you have the right to find an employer that does correctly value you. (It's also important to note that all the benefits already accumulated, and those accumulated up until any changes come in, are not going to be changed - as I understand it, this is about how future benefits are earned.)
If BT are undervaluing their staff, then this may come as quite a shock to them if a significant percentage ups and leaves....!
It's a bit hard to do anything about the promised future income that won't materialise though isn't it? Especially if you're in the middle ground whereby you haven't amassed a large sum but it's too late to really make something out of a private pension if you started today. Final salary schemes were a great boost to those prepared to stick around and were a way of buying loyalty from your staff, which makes fucking them over that much harder to stomach. You may also find that someone on 35k may be able to move to somewhere paying 40k (I doubt pay differences will be substantial) if they're lucky but it is unlikely such a boost will make up for the pension shortfall.
Personally I never rated anything that was promised over contractually obliged: bonus vs salary, db scheme vs money purchase etc. as I always thought it had the potential to be a con by the employer to suck in the staff.
Frankly I'm astonished that BT still has such a scheme that (apparently?) was/is still open to new joiners?
These must be as rare as hen's teeth these days - certainly I've never worked at a company that has one, and there's absolutely no way my current company could even come close to affording to set up such a scheme.
I'm sure it won't be a popular opinion, but with ever increasing life expectancies keeping such a scheme open (on the same terms/benefits/payments as historically) would have essentially been a huge pay rise for the staff and some very quick back of the envelope calculations pretty strongly indicate that BT has no choice but to change things if they want to remain competitive. They've already effectively admitted that they need to build out a full fibre network and retire their copper network - and that puts them in direct competition with new comers like cityfibre, hyperloop and so on that are building full fibre networks and have none of the historical baggage or regulatory constraints that BT has.
From the union's statement, it's unclear if they actually recognise the reality of the situation and are prepared to make compromises to ensure the long term survival of BT.
"Frankly flibble, I'm astonished that people who know you haven't punched you in the face."
If ever the phrase "anonymous coward" was applicable, I think this would be it. What an asshole you are - whoever you are. I reported this as an abusive comment and am disappointed that El Reg have done nothing about it. Typical keyboard warrior who probably wouldn't have the balls to say "boo" to a stranger in real life. Pathetic!!
I'm not sure why you (OP) got the down votes as you seem to be stating the obvious. Such schemes were always poorly thought out and were overly generous. You would need to reserve a massive portion of an employee's remuneration to allow for such generosity. The only people that now get such schemes are politicians because they want them and you and I and future generations pick up the tab.
I also agree with your thoughts regarding the union. I recognise they are there to protect the rights of the workers but at some point you butt up against the viability of the employer. If you want to see an example of this look for historic articles where the Australian unions representing car manufacturing workers used to crow about the deals they'd made for better pay. How's that working out for their members?
The only people that now get such schemes are politicians because they want them and you and I and future generations pick up the tab. .... Mark 65
Is that then fair and reasonable and to be allowed to continue or should political leadership be displaying exemplary programs based upon sustainable deliverables to deliver the stability and prosperity they are always professing to serve, and server to others.
Such as you say is, is surely an inflammatory revolutionary act which targets and diminishes the politically incorrect host, is it not? And that's a double whammy of madness running riot in the House and throughout the Parliamentary estate.
"Frankly I'm astonished that BT still has such a scheme that (apparently?) was/is still open to new joiners?"
It's not. The Defined Benefits scheme (i.e. a defined fraction of your Final Salary) was closed to new members in 2001. Anyone joining BT after that date is on a Defined Contribution scheme. In 2009, the Final Salary was stopped for those DB people, and it became a "Career Average" fraction. So the DB people (who joined before 2001) have two schemes: pre-2009 Final Salary, payable with no reduction at age 60, and Career Average post 2009, payable at 65. When you retire & want a pension, you have to take both at the same time, so if you (say) want your pension at 60, you have to take a roughly 35% reduction on the post-2009 part (approx 6% per year of early draw). Now they're closing the scheme completely, but accrued benefits are (hopefully) protected.
It seems a bit odd to me since no-one who joined after 2001 is on a final salary scheme, and I believe there are something like 300,000 pensioners compared to about 30,000 pre-2001 people still paying in. So that's a 10:1 ratio of unaffected:affected people. Not being a Clever Person, it's hard to see how they'll trim the costs significantly with such a ratio by closing the scheme now, unless we all live to about 200 or something.
They are also improving the terms for the post-2001 people (a good thing to do), who are on the Defined Contribution scheme, since everyone'll essentially be on the same scheme post-April 2018.
BT's CEO is quite open about how we've been overpaid in recent years. Personally I wouldn't agree with that, but then again I'm paid quite a lot less than he is.
Quite often schemes remain open to existing members up to until just after the CEO or last senior director retires.
Besides there is a lot of criticism of shareholders out there. However the largest shareholders in these blue chip companies are of course Pension Funds. Shafting the 'shareholders' will have a direct effect on pension funds in this country whether they be DB or DC schemes. Be careful what you wish for.
Without some kind 'global union' for 'us plebs' versus 'elites', we're all f*cked. What if no corporate-worker went to work for day.... a week... a month... would that concentrate minds at the top? Hardly! Corporates lobby for laws they want, while simultaneously cheating on their taxes using tricks like the 'Single Malt'. There's no way to win against that, never mind 'get even'.
My answer was to move all my pensions out of company schemes and into my own SSAS and used that to buy a commercial property. If more people did this we'd see less money in corporate schemes, fewer exorbitant stockbroker bonus payments, and more money to be passed on to future generations. I know there are liquidity issues, but I know where there money is, and I am confident I can manage the outcome better for me than anyone else can...
For those of you who say that BT and their emloyess historically made a deal so they should stick to it/get what they signed up for respectively consider this.
Many years ago, i joined the workforce at 16 paying tax and NHI from the outset. The Govt deal was that i would retire at 65. They've reneged on that. A couple of years ago, i had paid the required maximum number of years contributions for a full state pension. They've reneged on that.
In the 80's i started a private pension, with the deal being that dividends were re-invested in the pot. NuLabour and especialy Gordon "I saved the f******* world" Brown reneged on that.
Notwithstanding the otherwise parasitic world of private pensions, the effects of 13 years of NuLabours "economic management", depressed annuities etc, the current outlook is considerably worse than the "deal" i signed upto.
I also bought a house in a Metropolitan Council district. The inherent deal being that i paid full Rates, Poll Tax, and Council Tax as applicable, in return for all the services provided, including local policing.
Now, despite ever increasing rates and precepts, an ever increasing proportion being sidelined for pensions**, services are being drastically reduced and/or withdrawn. Some deal.
For many years, i had a deal with BT to provide a landline at reasonable cost. Now, having almost doubled in 5 years, mainly to pay for football, i'm reluctant to pay yet more for unrealistic BT pensions.
** the SO and all of her immediate family "work" for Councils. DON'T, just don't, get me started on just how much they whinge about how badly off they are in respect of pensions.
And Millennials.
Just how on earth are they expected to start to provide for pensions when cars, at 17 or 18, are expensive to run and repair, £500+ smartphones with data plans at £68 month, years of knocking back vodka drinks and cocktails, foreign holidays and many not starting actual work, and paying tax and insurance contributions, till at least 22?
"I also bought a house in a Metropolitan Council district. The inherent deal being that i paid full Rates, Poll Tax, and Council Tax as applicable, in return for all the services provided, including local policing."
You hardly bought a house with a lifetime service agreement built in to the purchase. You pay yearly for services and policing. You get the services and policing that you paid for that year.
If the services are being cut, it is probably because they don't have enough money, therefore petition your MP to change legislation so that you can remove the cap on local government council tax rises and then petition your council and PCC to charge you and everyone else more.
"Ahhhh, screw the workers then"
Well yes and no - what do you think happens if the scheme becomes unaffordable to the company? I'm pretty certain it means that the workers get screwed, just in a different and less expected way - ie. mass redundancies, or the company ultimately going bust and the pensions ending up in the Pension Protection Fund.
It's a difficult balancing act. Have BT management got it right? No idea, there doesn't seem to be anywhere near enough data published to make a judgement on that, but I'm pretty certain they're right to consider whether the scheme is affordable to the company in the medium-long term, and I hope they and the unions have a proper balanced discussion about how to ensure that.
It already has - ISTR a letter informing me of that a couple of years ago.
I believe the goverment keeps trying to get the courts to allow it to back out of its promise to underwrite the whole of the pension that I and many others were promised at the time.
Love the tories dislike of legal contracts.
Always p!sses me off when companies that took pension holidays, to bolster profits figures, shareholder payouts and fat bonuses for senior managers in the 80s/90's boom years, now feel that the employees are the ones that should fill in the deficit. Will regulators or government step in, no of course not, as they are the lazy incompetent bastards, who sleep in the same beds as the companies, that allowed this to happen and screwed the working man/woman out of their deserved pension !
I'm anti-socialist, but to protect my right to a reasonable pension, I would strike, even if it does harm to my employer !
In the 80's companies were forced to take pension payment holidays for schemes that were in surplus. Making further contributions was seen as tax avoidance - the contributions reduced the company profit and hence HMRC's take in corporation tax - and then made illegal.
My neighbour is a long serving bt employee 20 plus service. He’s said he could of moved many many times doubling his salary but it was the pension that kept him in. He said yesterday he felt completely 5hi77ed on by the bt management. Why is it the hard workforce get always slapped in the face for being good workers.
If the changes do go though bt will have to start paying market rates for salaries and kids goodbye to the life blood of bt loyal staff. Unfortunately the brightest and best will leave the company.
When I joined as a teenager I joined the pension scheme. I signed a contract agreeing to pay a percentage of my wage into the fund and in return I would retire aged 60 on half pay. They broke their side of this contract by taking a pension holiday. They also apparently used pension funds to encourage lots of staff to retire early. In 2009 our union agreed with management to increase the amount we paid in, added 5 years to the time we paid it for, delayed our retirement age by 5 years and removed the final salary factor. I believed they broke our contract again. Now they want to rip us off again. Well its not on! It's about time the government stopped supporting these immoral breaches of contract. The company is nothing without its employees. Treat us honourably!
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