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Bt Ruling Could Open Pension Claim Floodgates

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Taxpayers could be on the hook for tens of billions of pounds to cover a string of privatised companies' pension schemes after the precedent set by BT's landmark "crown guarantee" victory.

A former senior lawyer at the Pensions Regulator told The Daily Telegraph that "there are a good number of [pension] schemes that have promises from the state that could be crown guarantees".

Clive Pugh, formerly trustee services manager at the Pensions Regulator and now a partner at Burges Salmon law practice, said he expected a "flood" of claims for recognition of government protection from other formerly state-owned companies.

"With this [the High Court's ruling upholding BT's crown guarantee on Thursday] and many other potential crown guarantees being clarified, it seems as though the Government is now subject to billions of pounds of potential liabilities just as it is trying to reduce its deficit," he added.

Mr Pugh said other privatised companies have been closely watching BT's battle with the Government over the guarantee, over the guarantee which will force the state to cover retirement scheme deficits in the event of insolvency.

He added they are likely to bring similar claims if the telecoms group emerges victorious from an expected appeal. "I would be very, very surprised if there are not follow-up court cases," Mr Pugh said.

It means the taxpayer could, theoretically, be forced to pay out up to £100bn to cover pension liabilities in the unlikely event that several of the companies grant guarantees go bust.

The High Court ruling on BT's crown guarantee means the taxpayer must ensure the pensions of almost all the 344,000 members of BT's pension scheme. A payout in the event that BT goes bust could be as much as £22.8bn.

However, Mr Pugh cautioned that other privatised companies are unlikely to have as strong a case for state protection as BT. It is understood BT's case hung on the interpretation of two sentences among reams of legal documents written when BT was privatised in 1984.

It is difficult to discover which companies have a strong case as the information is only readily available to the pension schemes' trustees. However, John Ralfe, an independent pensions expert, said Railway Pensions, the scheme for rail industry employees, UK Coal and Trinity House, which runs the UK's lighthouses, are thought to have the best cases for claims. Others mentioned include British Gas and National Grid.

A spokesman for the Pensions Regulator confirmed some other companies do have crown guarantees, but refused to name them,

Ros Altmann, a former government pensions adviser, said the taxpayer could be left with a "terrible burden".

"If BT wins [the expected appeal], other companies could certainly challenge their case in court," she said. "It could all get quite messy.

"This could be a huge blow for the taxpayer. We are saving £5bn a year on the state pension, yet at the same time the state could be made responsible for billions [of private sector pensions]. The poor taxpayer is suffering from the inability of politicians and policy-makers to understands the long-term financial realities of pensions."

BT Pension thread

Thought this deserved a new thread rather than being tagged onto the other BT Thread.

Interesting numbers so the Chancellor annouces £80bn of cuts and just a few days later the taxpayer potentially is on the hook for around £100bn of new liabilities.


Still I'm sure the govt had all of these figures factored into it's savings...

Praise be to Thatcher what an excellent job she did in privatizing our national industries....

All of the short termism of our past political leaders appear to be forming the perfect storm of all bubbling to the surface at once. No one has the money to cover the liabilities due.

Are these pensions indexed linked to inflation?

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Given that the conservative party were the architects of these liabilities and thus politically culpable, and given that these liabilities only become so in the event of the issuing company's insolvency, does this not suggest that the issuing company now becomes, in at least the largest cases, too big to become insolvent, at least whilst the conservatives are in power (remember, these companies receive large contracts from government)?

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This is too big and too costly to contemplate accepting. If the judges are mad enough to try and stiff the taxpayer for this money, Parliament must act and legislate against any taxpayer payment. If that means pulling out of Europe to circumnavigate eu human rights legislation, so much the better. Why are the human rights of the taxpayer never respected?

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