Updated BT has lost its legal bid to cut its £14bn pension deficit by slashing interest rates for 83,000 members of its post-privatisation pension scheme.
The telco wanted to move the scheme from the old Retail Price Index inflation rate to the newer (and lower) Consumer Price Index rate for members of Section C of BT's pension scheme. Broadly speaking, RPI is normally higher than CPI.
While she agreed with some of BT's legal arguments, Lady Justice Asplin dismissed the telco's appeal because High Court judge Mr Justice Zacaroli, who threw out the case the first time round, had not made any mistakes in law when he made his judgment. She said: "Whether RPI has become inappropriate is an objective state of affairs which, if it exists, triggers the obligation to choose another measure of the cost of living."
Ominously, the judge added:
A change in the index used will not only affect the level of pensions in payment for Section C members but will also affect the level of funding of the Scheme as a whole.
BT had argued that the High Court was wrong to say that the pension scheme's legally binding rules stopped it from moving pension scheme interest rates off RPI. The Office for National Statistics (ONS) deprecated RPI in 2013, while BT also said that the way RPI was calculated made it inappropriate for further use – something both the High Court and Court of Appeal dismissed.
The judges heard evidence from a range of high-status economists and statisticians, including articles written by the ONS, the Royal Statistical Society and the UK Statistics Authority.
Back in January High Court judge Mr Justice Zacaroli ruled against BT after the telco asked the court to decide whether or not it was legally entitled to switch the interest rate on Section C of its pension scheme, which is for people who joined the one-time state-owned monopoly firm after its privatisation in 1984. Sections A and B are for those who joined before that date.
The Unite trade union previously warned that if BT won, individual pensioners could theoretically have seen up to £15,000 wiped from the future value of their pensions. ®
Updated to add
A BT spokesperson told The Register: "In December 2017, we sought a decision from the High Court as to whether it was possible to change the index used to calculate pension increases paid in the future to members of Section C of the BT Pension Scheme (BTPS) from the Retail Prices Index (RPI).
"The High Court decided in January that it was not possible to change from RPI to another index. We appealed that decision. The Court of Appeal has now handed down its judgment which upholds the High Court's decision. We are disappointed with the outcome and will now consider the judgment in detail in order to decide next steps.
"The relevant index for pension increases for members in Sections A and B of the BTPS remains unchanged as the Consumer Prices Index (CPI)."