BT looks to clarify crown guarantee

This week will see a very important case come to court in a move instigated by the trustees of the BT pension scheme who are looking to clarify the extent to which the UK government would underwrite the pension scheme via its "crown guarantee". Both BT and the trustees of the BT pension scheme have been in talks for some time about reducing the £9 billion deficit which has built up over the last few years. This is by far and away the largest defined benefit pension scheme in the UK and the funding shortfall has impacted upon the amount of funding available to pay dividends to shareholders. So what will the courts decide?

Depending upon the ruling we could see BT either reduce its pension fund premiums, which would benefit shareholders, or we could see the effect of the "crown guarantee" reduced and BT forced to increase pension fund payments yet again and reduce dividend payouts. The crown guarantee goes back to when the company was privatised in 1984 when the former Conservative government gave its full backing with regards to members of the BT pension scheme.

This week could be a very decisive moment for the future of British Telecom which has seen business struggle and pension fund payments drain vital funding from the company.