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BT loses pensions appeal

Government liable to cover BT pension scheme deficit under crown guarantee

23 October 2014

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The European Court of Justice (ECJ) has supported a 2009 decision made by the European Commission and ordered BT to pay make repayments of over £16m, due to exemptions the company received from pension rules.

The UK government introduced the Pension Protection Fund (PPF) in 2004 and granted an exemption to BT, which the European Commission ruled constituted state aid and was therefore illegal.

BT has said that it is disappointed by the courts dismissal of the appeal, but has accepted the decision.

In delivering their judgement, ECJ judges said: "The court hereby dismisses the appeal and orders British Telecommunications plc and BT Pension Scheme Trustees Ltd to pay the costs."

Following the privatisation of BT in 1984, the group received a guarantee from the government pledging to cover its contribution into a pension fund if the group failed, which is known as the crown guarantee.

BT argued that it should not have to pay the full PPF levy as the crown guarantee covered some of its member's benefits.

The European Commission acknowledged BT's interpretation of the arrangement, but said that it gave the telecoms provider a "selective economic advantage" which could "distort competition and trade between member states".

The commission also noted that the crown guarantee means that the UK government will be liable to pay most of BT's pension scheme deficit if the group goes bust, but ruled that this is an issue of domestic government guarantee and does not infringe any rules on competition.

 

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Pensions