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BT £9bn hole: How much could fall on taxpayers?

Robert Peston | 09:16 UK time, Thursday, 11 February 2010

The hole in BT's pension fund is a jarring £9bn, according to the formal three-yearly valuation.

BT logo on a buildingThat's the largest pensions deficit ever announced by a listed British company, although some analysts thought the gap could be even higher.

For example, John Ralfe - the pensions expert - thought the deficit was closer to £11bn.

Even so, £9bn is a big number. And under pensions law, this is a formal debt of the company and has to be paid off.

There are two ways of looking at this debt.

If you're a BT shareholder, it is a massive and worrying drag on BT's ability to invest, grow and pay dividends.

If you're one of 340,000 current or future BT pensioners, the hole would raise concerns about whether the business has the wherewithal to honour its financial commitments to you.

That said, what will particularly trouble BT's owners and employees is that the Pensions Regulator has substantial concerns with BT's plan to fill the hole.

BT has agreed with the trustee to pay £525m per annum into the fund for three years, and then £585m, increasing annually by 3%. Adjusting for inflation, BT would be paying in £533m each year.

That is certainly not a trivial contribution. But it won't eliminate the deficit for 17 years, which - as John Ralfe points out - is longer than the 10-year repayment schedule which the regulator normally prefers.

However, BT pensioners have protection not normally afforded to members of private-sector schemes: when the company was privatised in 1984, the government gave a commitment that it would honour the pension liabilities to those who belonged to the scheme at the time, in the event that BT were ever to go bust.

The degree of protection that provides to today's scheme is not 100% clear. BT's trustees believe that it means that the state - that's us, taxpayers, by the way - would be on the hook for just under 75% of the scheme's current liabilities.

To end any uncertainty, the trustees have taken the issue to court, for clarification of the extent to which taxpayers would be liable, if the worst came to the worst.

Were the court to rule that taxpayers are standing behind the lion's share of the scheme's liabilities, that might persuade the regulator that BT's £533m annual payments into the fund are sufficient.

On the other hand, the regulator might look at today's third-quarter results from BT - and note that the business is recovering faster and stronger than BT thought would be the case a year or so ago.

For example, BT now expects to generate free cash flows of £1.7bn this year, 70% greater than its initial prediction.

And although BT has slashed its dividend, it is still planning to pay dividends.

It is not implausible that the regulator will eventually rule that BT should work more for its pensions and less for its shareholders - which would imply that the company would have to pay even more into the pension scheme.

That said, the regulator would not want to impose pension payments that were so large that they hobbled BT, because that would damage pensioners as well as shareholders.


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  • Comment number 1.

    BT (and other!) company pension fund deficits are indeed worrying.

    BT was privatised a very long time ago and the deficit post-dates this event I think. I do not see that in law that the taxpayer will have to bear a special charge for this pensions miss-management by BT and the trustees of its pension fund.

    First, the impact will be on BT's customers and staff by higher charges and lower pay combined with higher contributions. Then through corporation tax the general taxpayer.

    The fat is that pensions are yielding far less in annuity purchase today than was expected as well as the funds being reduced in size through losses on the stock exchange investments. Everyone is suffering similarly so it is unreasonable that any special cases should be bailed out by similar sufferers. Annuity yields and the stock market have collapsed over the decade and this is directly attributable to the monetary policy regulatory regime carried out by the Bank of England's incompetent gutless regulation.

    The bank and its management who did not have the guts to do what they knew that they should do (i.e. put up rates) have been responsible for this collapse and the pensions collapse is part of the wider collapse.

  • Comment number 2.

    Didn't Mrs Thatcher sell off that firm, with the government pension guarantee? How many billions have her "free-market" experiments cost us, so far?

  • Comment number 3.

    All of it.

  • Comment number 4.

    How much of this, and other pension fund shortfalls, is due to Gordon Brown's raid on the pension funds, one of his first acts on taking office in 1997?

  • Comment number 5.

    Brilliant; good to see us earners for UK PLC nailed to the cross for the sins of another private company. Free market by A***.

  • Comment number 6.

    After privatisation the taxpayer MIGHT be liable for SOME of the deficit, had BT not been privatised then the taxpayer would CERTAINLY be responsible for ALL the deficit.

  • Comment number 7.

    The time has now come for all governments to abandon all responsibility for pensions for all its employees in the civil service and all other state own services or industries,as all the pension schemes are about to bleed our nation dry.

    These schemes must now be all phased out as they are totally unsustainable in the long term.

    The only pension the state should guarantee for any citizen in the UK is the state pension.

  • Comment number 8.

    #2 If it were still public we (the taxpayer) would be liable for the whole lot, like the rest of the gold plated civil service pensions that the rest of us in wealth creating sectors pay for but no longer have access to (especially since Gordon's raid on our retirement pots).

  • Comment number 9.

    Is BT just the first of the privatised companies to take advantage of the Bank of M&D? Might BA also use this as a way to lighten the load in extremis?

  • Comment number 10.

    Another triumph for privatisation,foreigned ownedand being bailed out by we, the taxpayers

  • Comment number 11.

    Enough is enough.

    This is a company that mis-manages their infrastructure, runs a highly expensive and inefficient customer support service, and is forced to resort to dubious trials of snooping technology to stand a chance of balancing its books.

    Most certainly the UK taxpayer should have nothing to do with bailing out this company; a siginificant portion of taxpayers will already have paid (probably more than) their fair share through telephone and internet bills.

    The audacity of this company to try and demand money from everyone (from the BBC for iPlayer, from everyone for the phone levy, and now no doubt a further hit to the public finances from this bailout) is intolerable, and a blight on the name "British" that they include in their name.

  • Comment number 12.

    #2 - less than Brown has cost the country by an order of magnitude at least.

    Sad, because I'm not exactly a fan of the Tories either, but unfortunately true all the same.

  • Comment number 13.

    The directors know BT is too big to fail.
    Yet again, no regulation. just add it to the future taxpayers bill
    Somethings gotta give

  • Comment number 14.

    I agree with # 7. It's about time people in the public sector started to take responsibility for their own retirement. I have to fund my own pension (which i find a struggle) with a very small contribution from my employer. I will not be enjoying a state sponsored final salary deal. The country can no longer afford such generosity. Also, the govt needs to sort out the parlous state of annuity schemes.

  • Comment number 15.

    totally agee with you .i would also legislate that to recieve the state pension you would have to be resident in the uk for at least eight months of the year if not no state pension.

  • Comment number 16.

    It seems reasonable to offer some guarantees of protection in the event of a newly privatised company going bust - if it's to sell it has to be of interest to buyers. But there clearly comes a point where guarantees have to end, where the company has to be deemed to have been successfully privatised and no longer in need of state backing.

    If it can call on taxpayers to fill any holes why would it bother putting anything aside for pensions - just hand it all out in dividends and let the taxpayer pick up the tab.

  • Comment number 17.

    Is that all one needs to do to get your hole filled? Well I am formally announcing a hole in my pension scheme. now tell me when and where I collect?

  • Comment number 18.

    "But where did all that 9 billion go?" shout the BT pensioners.
    The answer....into the pockets of the "club"....the City of London, its' bankers, investors and sharp cookies.
    I'm told that there is a sign as you enter Canary Wharf which reads...."Welcome to the City of London, Private members club. Riches guaranteed, no matter how much of a pigs-ear you make of things"
    Pensioners not permitted (except contributions)."
    The City is expert at destroying pension funds, investment funds, endowment funds etc.
    They did it in the 90s, and in the early 2000s, and now they've done it again.
    Need to set up a private pension?
    Give it to your granny to put in the post'll do much better than the City.
    The government, the FSA and the City need to get their heads together to sort out this hopeless, recurring pension damage.
    "Private Club capitalism", or "Clique capitalism"......the public provide the capital with a lifetime of contributions, the City puts it in its' pocket and declares a "credit crunch", or a "dot-com bubble" or some such excuse.
    I'll say it again....pension funds are "sitting ducks".
    BT pensioners better get some cheap bread and mince in, while the fat-cats of the City are out to lunch....champagne and oysters no doubt.

  • Comment number 19.

    Firstly, the deficit is an accounting fantasy not a real shortfall.

    The deficit is worked out by taking into account projected life span, gilt rate etc it is therefore built on a series of assumptions some of which will ultimately be correct and some of which will be wrong.

    Secondly the pension deficit is so large because BT previously employed far more people than it does now, as they die the deficit reduces. It has not been helped by GB raid on pensions, stock market collapse but it was no doubt underfunded when BT was privatised which is the fault of govt in the 20-30 years before privatisation.

    At least we have gone from a situation where we, as taxpayers, were totally liable for the pension, BT was a monopoly and provided virtually no customer service to a situation where we might be liable for some of the pension and if you do not like BT you can get your phone service from many other companies - Oh and BT pays tax

  • Comment number 20.

    "...when the company was privatised in 1984, the government gave a commitment that it would honour the pension liabilities to those who belonged to the scheme at the time, in the event that BT were ever to go bust."

    This does suggest that a large number of politicians, at the time, saw through the Privatisation hype and hence the introduction of legislation to socialise the pension losses that privatisation might cause. This implies that the Tory majority (at the time) could not have been as convinced about privatisation as they were all publicly saying! Anyone who fancied objecting was simply drowned out by media and business interests.

    Their free-market economic thinking had begun to decimate UK manufacturing. The transfer of British jobs to Asian people, by 1984, was clearly visible to all. The thing that gets me is the Government, (Tory and Labour ever since,) has simply carried on with the same totally blinkered policies knowing full well the destruction, given time, it's economic policies could cause. Obviously it hoped they wouldn't, but it's ironic to say the least that, whilst the manufacturing side of the UK economy was a big doubt, our fabulous politicians clearly believed they could trust the bankers to keep on "delivering."

    Hopefully, the Pensions Regulator will win and the shareholders will lose, for a change? Although that seems doubtful.

  • Comment number 21.

    Check this out!

    Bill Nighy video backing Robin Hood tax on banks

  • Comment number 22.

    There is another gap. There is 15Tbps (terabits per second) gap between our UK peak hour data transport capacity and what is needed for a fully connected Digital Britain - full posting available if anyone is interested.

    If Ofcom pushed to change the regime from costs recovered on 'efficiently incurred costs on a 1970's telephone service to an incentive scheme where BT could recover more the more capacity it made available, then we would get an information economy and that pension deficit could be topped up in no time.

    Let the bits flow, for less than 1/2p a GB for anything about 20GB, the problem would be solved pretty quickly. The old call conveyance regime, supported by the existing legislation, provides no incentives to improve the nations data transport.

  • Comment number 23.

    What was the position of the pension funds before Gordon Brown decimated them in the late 90's i seem to recall very few worries at that time...of course his banking buddies liked it because it made the pensions they were trying to sell us more attractive ( we know how responsible they were)

    Only a few months now and the public will tell you, who they think is responsible for the mess our economy is in and dont be surprised if they think this has nothing to do with margaret thatcher.

  • Comment number 24.

    I wonder what Mr Vince Cable would make of this issue.

    Do ask him Mr Peston. He will surely co-operate with you personally.

    Unless, of course, he too busy...

    ... preparing the dinner speech he is giving to launch his new book 'Free Radical' at Fortune and Mintons (somewhere near the Royal Academy in Piccadily, W1):

    22th Feb 7pm.
    Tickets Ninety-Five pounds only.
    A snip for all pensioners, BT's especially.

  • Comment number 25.

    Robert, we talk of the formal three year valuation, we know however shares are c50% higher than last year, would this mean the deficit is probably a lot less than the calulation would give us

    #8 yes the deficit would be 100% taxpayer liability rather than the possible 75% estimate but the £1.7bn free cashflow would be for the benefit of the taxpayer too.

    BT is typical of privatisation, the taxpaper incurs the expenditure of developing an infrustructure, once the infrustructure is there it is sold off below its value (with unlimited and unquantified taxpayer quarantees), investment is then cut to a minimum, the infrustructure milked and we are told how very clever the private sector is for turning negative cashflows into positive ones.

    Sorry guys, GB may be more current in the mind and i'm not actually a fan, but the other typical example of this is Thatcher caving in in one a private deal, despite the iron image, and the sell off on the cheap and guarantees from us all (or at least who pay tax to the UK govt) to the relative few (including those who do not)

  • Comment number 26.

    It appears a lot of the contributors here have not read the article. I do not see anything which suggests BT are relying on the taxpayer to bail it out - it is making a sensible proposal to close the deficit.

  • Comment number 27.

    # 7 good discussion point and i accept many more are agreeing with you than disagreeing. The only problem i have is that when i left school, it was very much a selling point that although wages were not too good in the public sector, when you retire the pension is fantastic. We may have to face up to this being unsubstanciable but i can't help thinking the many people who believed it will be hard done by.

  • Comment number 28.

    the fact that BT has a hole in its pension fund is scandalous.
    And for their to be an underwriting of 75% of the fund by UK PLC worse so.

    Sure it did not help that Gordy helped himself to a big wedge of everyones pension when he raided them but the fact that BT was a monopoly and has generated huge amounts of money from its customers ie us again, made a lot of money selling off the mobile side of the business o2, it is beggers belief that it has ended here. I bet the directors got their full pension rights doing their merry go round of being chief exec here for a few years, then all change and move to another company, what about their move to service companies IT infrastructure which they lost a bundle on, the staff in this instance a decimated one at that are to be applauded for their work, yet the hole exists.

    And this is what is wrong with the capitalist system, where you have a company that by virtue of its size and location can generate lots of money for shareholders and directors where their business aim is to maximise shareholder gains , which is a stupid when you think about it. IF they make sure the work force is sufficient to satisfy the customer, their next objective is to make sure all the workforce are covered not just the directors , then and only then does the shareholder come into the equation, but if they do step 1 and 2 right then step 3 follows naturally.

    I see the figure of shortfall has increased from around £3 Billion to £9Billion in 5 years due to the looting that has gone on in the last 2 years but also the pension fund performance.

    That is where they need to be looking now, how is it these pension funds who take very generous fees regardless of how the fund performs, and who aid and abet the hedge funds etc by lending out their shares because they get a nice little earner for themselves rather than it contribute to our pension fund, there needs to be an investigation into how they are run because they are not giving good value for money.

  • Comment number 29.

    I took voluntary redundancy from BT back on '93. The Package offered was too good to turn down, so good, in fact, that the idea behind it was completely undermined by the offer itself. BT hoped to encourage early retirement and told us that they'd been overpaying in to the pension fund, and they wanted to release some of the money 'frozen' within it. By people taking up early reitrement, this would reduce the amount in the fund, but more importantly reduce the amounts required to pay in. Double irony then that firstly they lost vast tranches of engineering staff with 5-10 years experience and now there's a massive hole in the fund.

  • Comment number 30.

    #15 - would you also legislate to say that those who want to retire abroad also pay less tax because they will not need the state pension. It seems that you think it's ok for people to pay towards their state pension for 40 years or so and then not receive it. In fact, the pensions who receive the state pension but live abroad are saving the state money because they aren't using any of it's services. I don't see why it makes a difference to you where the pensioner lives.

  • Comment number 31.

    BT has mis-handled and abused its pension fund for 20 years. It had repeated, prolonged pension holidays when the rules would have allowed it to enhance future benefits and continue contributions, and it also under-funded thousands of early retirements.

    Now BT's current management are experiencing the outcome of past sins.

  • Comment number 32.

    As soon as pensions come up for discussion all the tabloid inspired prejudices come
    pouring out. I'm a BT pensioner, I've paid into my pension fund all my working life
    unlike the management who decided that the company could enjoy a lengthy
    contributions 'holiday'. I also paid into the fund when BT was the GPO, yes I was
    then a civil servant! The Civil Service has a contributory pension fund, so no civil service
    pension can be described as unfunded - unless the fund managers have made off
    into the sunset, Madoff style, with all the money. BT privatisation came with a pension
    fund guarantee, I don't recall there being a time limit on it, to suggest that should
    be the case is a piece of amoral thinking that we've become all too accustomed to lately.
    The other point to make is that the average public servant pension is around £7,000
    The sort of money newspaper proprietors and editors spend on annual holidays.

  • Comment number 33.

    One significant reason why various pension funds and their parent companies are now howling like dogs can be laid at the door of employment practice during the last Conservative government and the early Blair years. The thirst for "efficiencies" led to wholesale redundancies and a disproportionate number of these redundancies involved persons over fifty. Many - inside and outside the recently-privatised sector - exercised their right to take their pension immediately.
    Having been made redundant from a modest position with a private (always) company in my mid-fifties I personally did just that. By the time I turn sixty-five in a few years I'll have had over 100K out of that pension fund and, furthermore, I'll have failed to make around 20K in contributions I would otherwise have made. Multiply this experience by the numbers who have had similar experiences, throw in a few years when the company took a pension "holiday" from contributions because everything looked as though it was going so swimmingly and hey ho, a pension fund is soon in the brown and smelly.

  • Comment number 34.

    #14, As a current Student whos parents cant afford to finance my course I'm forced to take up student debts to pay for my studies to the tune of £8000 pounds per year, for a 4 year course that makes £32,000 of debt by the time I graduate aged 22. The governments own advice is that people should begin to save for their retirement from the age of 25. How can anyone on a starting salary, in any profession other than a horrifically overpaid person who gets paid to kick a ball for 90 minutes at a time, pay off a £32 000 debt in 3 years, in order to start paying for their retirement. Given the mess everyone's finances (Government, Companies and Individuals) are in, it seems a massive double standard that anyone who wants to learn a skilled profession that massively benefits the economy eg. Engineer or Doctor, is forced to take on a stupid amount of debt that on average takes over 10 years to pay off, but to also advised to start saving for a pension 3/4 years after leaving university. Drop the Student Loans system that is, discredited after last year, costs enormous sums of money to run and leaves graduates with a mountain of debt. The government is spending over £70 bn that it doesn't have for a US built weapons system (Trident replacement) that doesn't benefit the UK Economy, but wont pay for people to study for careers that do benefit the UK Economy. To those in the current government, and any future government: SORT YOUR FISCAL POLICY OUT, DON'T MAKE EMPTY PROMISES AND STOP THE DOUBLE STANDARDS THAT PLAGUE EVERY ASPECT OF MODERN POLITICS.

  • Comment number 35.

    Pensions in the private sector have been mercilessly disrupted by government culminating in the unforgivable raid by Brown extracting money that has has since been squandered. Pensioners who have paud for their pensions deserve protection ahead of all those in the public sector who have non contributory and rather lavish pensions - especially the members of this disreputable, deceitful and discredited government.

  • Comment number 36.

    Quote: After privatisation the taxpayer MIGHT be liable for SOME of the deficit, had BT not been privatised then the taxpayer would CERTAINLY be responsible for ALL the deficit.

    If BT had NOT been privatised then all the profits that BT reports each year would be going to the treasury, including the £1.7Bn cash it is sitting on. BT and other profit making company's should not be allowed to use the government as a fall-back because THEY have not made sufficient allowances for pension payments.

  • Comment number 37.

    One of the ridiculous elements in the whole pensions regulation surrounding valuations and deficits is that trustees are nolonger allowed to adjust for future growth in the value of investments. It's because regulations are designed by accountants and bankers instead of anyone who actually understands investments.
    Through means of a carefully designed investment strategy involving such things as Liability Driven Investments and Absolute Returns stategies, one could be more than reasonably confident that an annual equivalent investment of £533m would wipe out a £9bn deficit in considerably less than 17 years.
    Robert, given that you're not bound by pensions regulations, and, I assume, reasonably well versed in pretty basic investment strategy, why don't you report a more sensible outlook rather than the sensationalist '17 years to repay' nonsense that you lifted, without thought, from an accountant's view of the pension scheme...?

  • Comment number 38.


    Interesting that this situation is not purely restricted to a State-PLC relationship. Look at the ongoing Greece + Germany Euro currency situation potentially falling on German taxpayers for underwriting sovereign risk of default loan guarantees. Looks like Germany/France will resist IMF intervention in protection of the Euro against the speculators but given the substantial short by hedge funds in Chicago looks like the Germans will have to add the risk of default loan guarantees to the reunification bill. UK taxpayers will follow this route in footing the BT pension bill in a risk of default so why is UKFI and the German government not itself hedging in the swaps market. Surely this is how best to protect the UK taxpayer.

  • Comment number 39.

    I am a former BT employee and was a pensions expert with the company. I have paid for my deferred pension (not due until age 60)and have no qualms about claiming what is my legal right when payment becomes due.

    BT's Company Pension Schemes are funded by the employess by deduction from their salaries and a further contribution is made by the Company. As far as I am aware BT has not asked either the Banks or the Government to bail them out or lend a helping hand and Gordon Brown did not raid the Pension Fund.

    BT remains a highly successful company which continues to research new technology for the benfit of the customer. People should research the facts before they add their tuppenceworth as a very high percentage of the technology we use today was developed by BT.

    Privatisation cut a lot of research and development off at the knees under the guise of 'fair competition'. This only served to tie BT's hands behind it's back and the Company was reduced for a time to picking up the scraps left by other providers who piggiebacked on BT's network. Where are some of these companies now?

  • Comment number 40.

    26. At 11:28am on 11 Feb 2010, DMJeffery wrote:
    It appears a lot of the contributors here have not read the article. I do not see anything which suggests BT are relying on the taxpayer to bail it out - it is making a sensible proposal to close the deficit.

    Point taken However one of the main assumptions it's making is that the economy and its own business will be all fine and dandy for the next 17 years

  • Comment number 41.

    This is an interesting issue - ie. where the state should and should not intervene. Anyone looking at events of the past 2 - 3 years might be confused - I am.

  • Comment number 42.

    So now we know!

    Why foreign asset strippers have not moved in and purchased ALL of BT (at any time since 1984?)

    Didn't stop thousands of British jobs being outsourced overseas though did it? - Are there now 'foreign pensioners' in the mix also?

  • Comment number 43.

    Pensions are a long term investment and hence the long term picture needs to be taken into account. BT took a significant pension holiday during the dotcom boom period when the BT share price blasted the £15 mark. This should not have been allowed to happen even though the fund was in surplus at the time. The pension scheme has very recently been restructured resulting in lower benefits and higher contributions for many BT people. This all looks like mismanagement to me by the trustees and the company. I don't expect taxpayers to bail out my pension but I do expect regulation to prevent companies abusing pension scheme contributions.

  • Comment number 44.

    Looking at the comments. I think it is a good job BT are a forward looking company and not stuck in the past like some contributors. Pre 84 succesive governments reaped the rewards from the ultility industries with little or no investment for the future. Post 84 we have seen, through de-regulation the previous dinasaurs making good their investments into their own areas. Government assurance 'in the event' that BT were ever to go bust. BT are not bust... Get over it. You sound like it is costing you now. Well taxpayers that is.

  • Comment number 45.

    #20 spareusthelies

    "This does suggest that a large number of politicians, at the time, saw through the Privatisation hype and hence the introduction of legislation to socialise the pension losses that privatisation might cause. This implies that the Tory majority (at the time) could not have been as convinced about privatisation as they were all publicly saying!"

    How on earth do you read that into it? It's exactly the opposite!

    They realised that without taking off some of the load for a backlog of overly generous pensions from the inefficient, overstaffed and underperforming state-owned days there was no chance for the company to succeed. It was the legacy of the nationalised institute that was the problem!

  • Comment number 46.

    Good old Margaret! Rushing in to find cash without looking into the future. And the 'new tories' are saying they are the party of choice!!!!

    At least Mr Brown had his problems thrust on him, not created by him.


  • Comment number 47.

    Are the pensions defeicts not also partly due to the fact that companies were allowed to take contribution holidays in the 80's. I.E. they could take contributions out of employees salaries but didn't have put them into the pension funds if they were considered to be performing well.

    My father was a trustee for the pension fund at his company and thought the rule change was absurd at the time it was introduced, but there was nothing the trustees could do about it. (way before Humpty Dumpty initiated his raid on the pension funds)

  • Comment number 48.

    BT simply hasn;t been compensated by the Government for the business that it's lost through Government/Ofcom action in the interests of competition.

    Shame really.

  • Comment number 49.


    Simple answer to the complicated question: ALL of it....

    ~Dennis Junior~

  • Comment number 50.

    So it's possible I'll have to pay part of BT's retired employees pensions? Yeh, right! I'm already paying tax to pay for the hole in civil service pensions, local government pensions, High Court judges and MPs pensions! And my personal pension for which I've saved for a working lifetime will be about half as good as those in public employment!

    Time this stopped. General election coming. Now who wants my vote? Probably not any MPs, come to think of it!

  • Comment number 51.

    Pension funds:

    Government takes its tax.
    The pension fund deducts its charges.
    The share and gilt dealers get their commission.
    The Pensioner is forced to buy an annuity, the provider of which takes a slice for the privilege of it.

    And the pensioner gets what’s left.

    The Pensioner has no influence on the tax or the charges or the commissions that get taken out of their pension pot and has to buy an annuity at the end of it.

    Is it any wonder ‘Private Pensions’ are failing the pensioner.

    It’s just another financial scandal.

    Remember endowment policies, personal equity plans, equity release schemes etc.

    There’s not a month goes by when the press doesn’t highlight another failed financial product or firm.

  • Comment number 52.

    I'm confused. Are the BT supporters on this blog saying that the taxpayer should underwrite its pension fund because it is such a great company or are they saying that having a deficit of £9 bullion and finding the funds to plug it over the next 17 years isn't a problem ?

  • Comment number 53.

    A lot of bloggers seem to be blaming BT for this trouble.
    But BT ENTRUSTED its' pension fund to the City, as most companies do.
    If the City hadn't made such a desperate mess of the economy, this fund and most of the others would be in good shape.( Maybe not perfect, but not a complete disaster.)
    It is not a matter of pension-holidays or people living longer.....companies can plan for those things is the greedy, unstable nature of the City which is the culprit here.
    Companies should now offer their employees a you wish your contributions to go into our "City based" fund, or do you wish to take them in cash to make your own arrangements or to simply build up a savings account with.
    I know which offer I would take.

  • Comment number 54.

    "the government gave a commitment that it would honour the pension liabilities ... in the event that BT were ever to go bust."

    BT isn't going bust so the pension scheme should get nothing from the tax payer.

  • Comment number 55.

    No 1 John-from-Hendon
    I like your comments on Bank of England's gutless incompetent regulation. I have long thought that the
    artificial lowering of interest rates, and holding them low, as part of the quantatative easing strategy. is a major cause of our present financial distress. I would go further and describe it as open daylight robbery from the
    neediest in our community. Children living below the poverty line, Students denied access to a
    University education, those many OAP's existing solely on the State Pension, Charities such as the Red Cross,
    Save the Children, and others too numerous to mention, all of whom are devoted to making our Country a better place,all are victims of the current stupid short sighted practice of the Bank of England.

    P.S. Many thanks for helping me to get back my identity.

  • Comment number 56.

    The way I see it is that you want the working man, to save his hard earned cash to use in his old age.Perhaps put it in a bank so it can be gambled with,and for safe measure put up his retirement age,that way he will never have to use the money put aside for his eventual retirement.Just as well as it will have lost some of its value in real terms.

    ex-BT employee who sacrificed 6% of his salary to pay for his pension for 33years until dumped through poor health.

  • Comment number 57.

    The problem that companies like BT, which because of their history have a decent pension scheme, have to compete with companies which do not. As tax payers we will all have to support those who retire without company pensions.

    Back in the days of the Wilson government, the last left of centre government we had, Dick Crossman went to great trouble to negotiate cross party support for a national scheme, only to have it sabotaged by the Tory hierarchy. Then under Thatcher the national scheme was gutted, to make way for the private personal pension swindle.

    Pensioners with a comfortable income have an important economic role. They create demand even during a recession. They tend to need labour intensive things like home and health care, and extend the tourist season, and are not usually interested in the latest imported gizmo.

    We need more comfortably off pensioners. It should be the law that every worker is in a reasonable scheme.

    Industry wide schemes, as they have in Germany, are good idea. They can protect against the failure of a particular company, and prevent employers effectively borrowing from pension funds, as BT has done, by making insufficient contributions and having contribution holidays.They also make mobility easier and can cater for the self employed or those working in small businesses.

  • Comment number 58.

    39. At 11:53am on 11 Feb 2010, ziggyboy wrote:
    'I am a former BT employee and was a pensions expert with the company. I have paid for my deferred pension (not due until age 60)and have no qualms about claiming what is my legal right when payment becomes due.

    BT remains a highly successful company which continues to research new technology for the benfit of the customer. People should research the facts before they add their tuppenceworth as a very high percentage of the technology we use today was developed by BT.'

    Speaking as a BT customer I think the most salient point is that for a decade BT and SKY have always come 1st or 2nd in the 'worst customer service' surveys done by different organisations. Charging people 125 pounds to activate a residential land line is daylight robbery given that BT runs a natural monopoly in this area, and the reason we have the slowest, most inefficient internet provision in the western world is because of the total LACK of investment made by BT in this area. So do I begrudge paying BT pensions out of my taxes...have a guess

  • Comment number 59.

    am I the only one sick & tired of all these mistakes made by all government's tory, labour it does not matter. I am tired of PAYING for all of these "mistakes" it is hurting me & my family, tightened our belts, live on less, can remember the last time I had a meal, out a holiday, an extra glass of wine, living on cheap cheese sandwiches & sharing a small packet of crisps with my better half. I AM TAXED ENOUGH!!! ARRGH!! I am not the only one round here, were all sick of it. Bail out this Bail out that, money for everybody but me & mine! We need to get physical with our leaders we need to revolt, we need to tear down & re-build. Time is now, the place is here, it's time to take back our country & kick all useless leader out for good!

  • Comment number 60.

    Yet another example of how far we have gone in raiding future income to pay for current expenditure. At least BT is planning to (obliged to) redress the balance to the tune of half-a-billion p.a.

    I don't suppose the Government has any similar plans. From what I can gather, it has no "pension fund": or, put another way, it just has a hole!

  • Comment number 61.

    So who's going to sort my private pensions out!

    I dont work for in the public sector and get a final salary pension.

    I have paid between 17 and 25% of my salary into pension pots across a dozen different providers since leaving university 21years ago.

    In the last 20 years the pots have grown on AVERAGE 1.9% a year. That taking into account the tax rebate on my payments then just indexing the growth.

    The pots aren't even beating inflation, all i get is extra costs and fees and arnbt we doing so well with your money letters.

    The overall predicted pension, despite the pots growing all be it slowly, from ALL the providers has fallen EVERY year for the last 6 years.

    All the previders are big players and in the sunday times recomended buy's lists.

    Im looking at a pension that will pay approx 1/10th of my current take home pay IF im lucky and I take up smoking and drinking! So no happy retirement for me and hundreds others!

  • Comment number 62.

    Robert, please please dont tell super gordan or he will want to jump in and save the day again with his super BoE cheque book.

    On second thoughts, do tell him as it might stop him waving the cheque book at the EU conferance today and offer to save Grease.

  • Comment number 63.

    I know its already been said but for the sake of clarity the answer is £9 billion.

  • Comment number 64.

    As the banks wash their hands of the economic crisis they created their stink remains and the impact continues. Banks and Financial institutions should be taxed to pay for the situations their gambling created. Granted the governments turned their collective heads and failed in over-sight and regulations but that does not make the taxpayer responsible for gambling debts.

  • Comment number 65.

    In 1989 I Joined a Mutual company in the City. Upon my joining I discovered that they were closing their final salary scheme (same sort as BT) because their actuaries had calculated that in the future this form of commitment would cripple the company (I went in to a Money purchase scheme instead, where I invested my money into funds at my risk).
    My point is: Even Back then, a run of the mill City company had already worked out that increasing longevity was going to cause a Final salary scheme to become toxic to the company that underwrote them.
    And, as with everything with actuaries, it actually meant ALL FINAL SALARY SCHEMES would become toxic over time.
    Considering back even in the Seventies the average working MAN lived for approximately 2 (Two) years after retirement, FSS's where probably okay
    Now its more like 20 (twenty)
    Anyway all things considered if BT gets a really good FUND Manager the deficit could disappear in two years :-)

  • Comment number 66.

    Wouldn't disagree with much of what you say but the arithmetic of "people living longer" is inescapable. A young person born a century ago would expect to leave school at 13 or 14, work until they were 65 and statistically live another five years or so on whatever savings they had - in the manner you suggest - "built up a savings account with" for their end-of-life. The ratio of years works vs years post-retirement was around ten to one.
    Nowadays people are frequently in education until their early twenties, yet they then expect to have a mere forty years of earning before retiring in their early sixties, and then living (statistically) into their early eighties - a ratio of two to one. It might work if they are going to be brain surgeons on 100K p.a. but have the retirement expectations of a hospital porter on 10K p.a. but generally they don't. Consequently the arithmetic doesn't add up. To save enough in forty years to tide them over the remaining twenty would involve setting aside a third of their salary and this isn't going to happen.
    So, most of us placed our trust - directly or indirectly - in the financial alchemists; the trustees of what the otherwise unmemorable Kinnock once memorably described as a "betting shop economy". While all the horses were winning it seemed a bundle of fun. Even after the men in red braces took their cut, people were still left with a profit which suggested they weren't going to have to suffer the 10:1 ratio of their forebears.
    Sadly, as some of us suspected all along, it was a con. All the horses couldn't win all the time. Our investments - individual or collective - might be up, but they were up, to a large extent, on the hard times of others. It doesn't take a genius to go into a company, fire half the workforce and scare the bejasus out of the other half so badly that they take a pay cut - but you can only do it once. Thirty years on from Thatcher the men in red braces have taken all their cheap brownie points. Now most of the horses are losing and the men in red braces are saying "er, sorry" and walking away from it all. If there's anything left you've still got to buy an annuity with it - maybe five to seven percent and if you kick the bucket tomorrow your capital is forfeit. There's a lot to be said for keeping it in a biscuit tin under the bed - literally or metaphorically - but if we intend to get twenty years of retirement it'll need to be a pretty big tin.

  • Comment number 67.

    "I'm told that there is a sign as you enter Canary Wharf which reads...."Welcome to the City of London, Private members club. Riches guaranteed, no matter how much of a pigs-ear you make of things"

    Yeah, i bet you were still told to believe in the tooth fairy as well steve. Dont be such a dipstick.

  • Comment number 68.

    # 6. At 10:08am on 11 Feb 2010, David wrote:

    > After privatisation the taxpayer MIGHT be liable for SOME of the
    > deficit, had BT not been privatised then the taxpayer
    > would CERTAINLY be responsible for ALL the deficit.

    No. We'd also have the employee's contributions, with interest. Furthermore, we'd
    also presumably have the £20 billion (in today's money) in dividends as well. Oh,
    and we'd have the firm itself, worth £16bn. Right now, of course, taxpayers have
    NOTHING but a gigantic liability, thanks to Mrs Thatcher - the spirit
    of free enterprise!

  • Comment number 69.

    The issue of DB pensions is a tricky one. A large part of the BT pension scheme liabilities (75% if what is said here is correct)is in respect to service when BT was a public company. There is a lot of risk in respect to defined benefit pensions for the sponsor (effectively because you have guaranteed a pension at retirement for the members) - therefore it would not have seemed unreasonable for a deal to be made at the time where the government would guarantee their share of the liabilities. The pension promise would have been funded in advance but this requires various assumptions including assumptions on future investment return and the life expectancy for members. Basically compared to expectations in 1984, it is very likely both of those have not done very well - investment returns would not have been as good overall (although that is more due to recent market falls) and people are expected to live a lot longer today. Both of these factors would have acted together to give these large deficits (plus other items of experience). You would find that similarly many DB pension schemes that have remained in public hands would have substantial deficits (as well as a large proportion of DB schemes in the private sector). So there is a substantial liability out there to be funded one way or another by the working population (let alone their own future pension provision). Note that, depending on the effective date of the BT valuation - the position may look better now due to a degree of market recovery.

  • Comment number 70.

    What's the problem, just get Gordon Brown to borrow the money. Save the world, save BT, easy peasy.

  • Comment number 71.

    Re 67 Perry Neeham,
    "Don't be such a dipstick" must have been talking to my wife.
    It's just the way I see things.
    I may be hopelessly wrong, but there are a lot of private pension plans that have gone down the drain, and you don't see City folk getting any poorer, do you?

  • Comment number 72.

    #65 ThisWorld wrote:

    "In 1989 I Joined a Mutual company in the City. Upon my joining I discovered that they were closing their final salary scheme (same sort as BT) because their actuaries had calculated that in the future this form of commitment would cripple the company (I went in to a Money purchase scheme instead, where I invested my money into funds at my risk)."


    9 out 10 actuaries are included in final salary pension schemes (FSPS).

    Any half decent actuary would not accept a job offer with any potential new employer if a FSPS was not included in the offer.

    Trust me, I know.

  • Comment number 73.

    BT runs and maintains the basic infrastructure of the communications network.

    Other companies are entirely dependant upon their systems and connection in order to communicate in this country. Whether you have your phone via a BT line, or a cable connection that also has to connect via the local (BT) exchange. The simple fact is that this company is a monopoly, and it is simply not possible to truly privatise such a beast!

    Maybe if during the 1980s a few hundred billion had been invested into secondary systems and dual running exchanges it might have been possible to break the company up in such a way as it would not be the monopoly it was and is- but they didn't. Instead the idea (as with the other infrastructure monopolies that were privatised) was that private business would introduce such levels of efficiency that wonderful magic market forces would sort out all the issues regarding investment and development.

    Instead we got what we have today.
    A rail network that has to be propped up by government subsidy otherwise the country would grind to a halt.
    An electric grid that utilises the cheapest components possible from France and the US instead of the world leading engineering we used to have.
    A gas network that had to fight the regulator to be allowed to invest enough to replace the rusting pipes before they collapsed instead of after (because investing too much doesn't allow the monopoly to be challenged).
    A communications network that regularly tops the worst service in Britain, when once upon a time it was rated as the best.
    A water network that doesn't repair leaks unless it has to, or unblock drains until there are floods.

    When the privatisations started I predicted this would happen. At the time I hadn't even started my GCSEs- so why are politicians so unable to see what is so patently obvious!?!

    Are we the tax paying public going to end up liable for the pensions deficit?
    Part of the privatisation acts ensured that those pensions were protected and guaranteed by the government by law.

    Kind of makes a mockery of 'privatisation' really doesn't it?

  • Comment number 74.

    53. At 12:36pm on 11 Feb 2010, stevewo wrote:
    'Companies should now offer their employees a you wish your contributions to go into our "City based" fund, or do you wish to take them in cash to make your own arrangements or to simply build up a savings account with. I know which offer I would take'

    I agree.

    The Government takes its share transfer tax.
    The pension fund deducts its charges.
    The share and gilt dealers get their commission.
    The annuity provider takes a slice.

    The pensioner gets what’s left, (assuming there is anything and the scheme hasn’t gone bust).

    And then you pay tax on that.

  • Comment number 75.

    65. At 2:06pm on 11 Feb 2010, ThisWorld wrote:
    Anyway all things considered if BT gets a really good FUND Manager the deficit could disappear in two years :-)

    I'm no actuary but are you saying BT will put in £9 bullion in the next 2 years or that they will just create a different figure for the deficit?

  • Comment number 76.

    #73 Leviticus

    CAPITALISM....dont'cha just love free-market anarchy ;o)

  • Comment number 77.

    Can we know which advisors were used to get BT into this mess? That way we can all avoid them, ensure their toxic advice is avoided and let them go bust.

  • Comment number 78.

    73. At 3:47pm on 11 Feb 2010, Leviticus

    Well, the politicians knew perfectly well what they were doing at the time. Winning votes, lining their pockets knowing they'd be alright and the rest of the population, well they can moan at whoever happens to be in power in 20 years time..... someone else's problem.

    Face it. We'll be working until we drop, knowing we've been milked by the generation who went before us.

    One way out of it is:
    we all pay close attention to the robin hood tax advert with the wonderful Bill Nighy and back the tax all the way through parliament - before the election.
    One we advert should generate a fortune, be award multiple Oscars, and the next Nobel Prize....

  • Comment number 79.

    I know a couple of BT pensioners and their pensions are what most people would call a salary. I also have a distant relative by marriage who has a pension from the EU and I call that a very good salary.

    This is not a complaint about anyone having a good pension - good luck to them - but perhaps the size of pension entitlements might be a problem for the BT pension fund.

    As for the taxpayer picking up the tab one can only state the negative. My pension is a fund which will have to go into buying an annuity and what that fund will now buy is pathetic.

    The simple truth is that either BT earns the money to allow the pension fund to recover or the fund and the pensioners will have to go short like the rest of us.

    The idea that I must pay even more tax out of what under Gordon Brown has become a piffling little pension so that others can have enjoy a better standard of living than I is just not good enough. Whatever happened to equality?

    Come to think of it whatever happened to the Welfare State which was launched with the idea that the working people of Britain would be looked after from the cradle to the grave? It seems to have become a process by which the people of Britain are stuffed from the cradle to the grave.

  • Comment number 80.

    Well, when the nuclear industry did the sums and found that its liabilities (for decommissioning) exceeded what it had in the bank (i.e. what was left after the government had taken away and sold off its investments such as Drax which should have been more than sufficient) it was forced to hand over all its assets to a government quango (the Nuclear Decommissioning Authority). Fortunately its pension scheme is well managed.

    So how much bigger does the hole have to be before BT has to throw in the towel? I think the nuclear industry was only about 1 billion short...

  • Comment number 81.

    Pension deficits will become the most contentious issue over the coming years.

    It's now virtually impossible to run final salary schemes that are not in deficit and the way things are going companies will be trading just to keep their pension funds going.

    Fine if this was the end of recession with strong growth ahead. We have seen pension deficits in the past which have been turned around during the growth period but things are different now. A long period of stagnation is ahead and final salary schemes will probably become obsolete or unaffordable.

    Public sector pension schemes are in a worse mess and the taxpayer just cannot afford to keep making the double digit top ups needed to keep them in their present form. The reason why so many jobs are at risk.

    This is one of the unknowns that has been swept under the carpet which when it does have to surface will be truly shocking.

  • Comment number 82.

    David wrote "...had BT not been privatised then the taxpayer would CERTAINLY be responsible for ALL the deficit."

    This point of view totally overlooks the fact that if BT had not been privatised all of the profits would be going to the government; the only shareholder.

    BT has a universal service obligation, something no private company is likely to commit itself to. Which politician is going to suggest geting rid of that obligation so BT can be on a level playing field with its competitors, when that will inevitably lead to rural & remote communities losing telephone & Internet services?

    It appears that BT is like a bank, too large to be allowed to fail. Look at the problems that caused.

  • Comment number 83.

    What did the BT pension fund look like when Maggie T sold it off?

    When did the mismanagement happen?

    What did Broon do about it when he was Chancellor:
    1. in not raiding its pension scheme when he raided the others.
    2. in making provision during the good years of 'fiscal prudence' for he must have known about it, just like he knew of the Police pension fund.

    BT should be allowed to crash. There are plenty of other telecoms companies who could take over and get rid of the constipation in the local loop that BT has held on to so as to be in control.

  • Comment number 84.

    # 77
    “Can we know which advisors were used to get BT into this mess?

    Politicians my friend! Bamboozled by their friends in the City. And, as we are learning daily, they all tell fibs (sub-prime mortgages, WMD, torture, public bad/private good; …) The Reagonomics experiment is now unravelling and we’re having to pick up the pieces. Maybe it would have been a good idea not to sell-off ALL the family silver and not to encourage private pensions at the expense of public pensions (contracting out of SERPS; switching to personal pensions). Remember the mis-selling of private pensions? Very soon the taxpayer will be paying for the gas and electricity he thought he’d sold - because the new owners haven’t enough capital for the future investment needed. Tell Sid.

  • Comment number 85.

    Just remember persional pension returns. There was a report this week showing how much the returns had fallen.

    Some one who saved £100 a month (at todays values) since their early twenties would 10 years ago have retired with a persional anual pension of just under 10k. Someone retiring today with that same monthly £100 payments will receive a pension of around 2k.

    So much for private pensions!

  • Comment number 86.

    >83. At 6:26pm on 11 Feb 2010, Naomimuse wrote:
    What did the BT pension fund look like when Maggie T sold it off?

    When did the mismanagement happen?

    Starting with the day they started to prepare it for sell off, up to the present and beyond!

    All the monopoly industries tell the same story.

    It goes like this:

    You have a small company that makes a profit of about 100k a year.
    Your assets are worth about a million.
    You decide to sell it.

    Do you:
    a) Value it at reasonable proportion of the cost of the assets and a certain proportion of the expected (or in this case guaranteed) income for a certain number of years. (Say, £1.2M for the sake of argument)
    b) Sell it for about £75k, retaining the liabilities for staff compensation to the tune of that amount or more if things go wrong in the future.

    If you are Margaret Thatcher you choose b!

    Simply increase those numbers a few thousand fold, and it's what happened for British Telecom, British Gas, British Rail...

    As has been quite rightly pointed out above, if we still (as a nation) owned BT then all the income that went to private investors would have gone to internal investment and the public coffers.
    When you have no shareholders you have no dividends to pay. You have no need to worry about hostile takeovers. You don't have to justify everything to people who don't know the technicalities of the industry in terms of immediate monetary comparisons in order to get things that the company needs to buy, bought.

    The one thing that didn't work with nationalisation (and still doesn't) is putting it into government hands for them to decide to sell it on at a knockdown price.

  • Comment number 87.

    The regulator Ofcom is presently doing an economic review into assisting BT's pension fund liabilities by sharing the cost out among other telecom service providers who effectively "piggy back" on the back of BT's network for extraordinarily generous wholesale pricing.
    Having worked for BT for 36 years,the company struggled to emerge from the financial damage of the Bonfield era. £30 billion of debt is alot in anyone,s money to overcome, especially with a regulator tieing the company's hands behind it's back in the UK and technology transforming the moneyside,( move to mobile telephony, voip,internet etc).
    But, for the UK as a whole and the "digital economy" hoped to create new jobs for the younger generation in decades to come using the 21CN and superfast broadband infrastructure, this is effectively the only company with the resources to create such a structure. Hobbling it any further will not just damage the company, but prevent there being any network to compete with other countries in the generation ahead. Labour's 2Megabit promise is simply 3rd world. And as there are virtually no manafacturing in Europe outside Germany,without something world beating, there is going to be many millions unemployed or emmigrating in the decades ahead.

  • Comment number 88.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 89.

    19. At 11:17am on 11 Feb 2010, Justin150 wrote:
    "Firstly, the deficit is an accounting fantasy not a real shortfall."

    NO! It is neither accounting, nor fantasy. Firstly, actuaries, not accountants, are the ones doing the sums. We accountants are blamed for enough as it is. Secondly, the deficit is only a fantasy if you believe that the actuarial assumptions are incorrect. Do you have some kind of insider knowledge that BT pensioners are inherently short-lived, and the actuaries are assuming that they will all live to 110? If that were true, it really would be a scandal!

    The idea that as BT pensioners die the deficit reduces is pure wishful thinking, I'm afraid. That would only reduce the deficit if they die younger than anticipated. If they hang on a bit longer than predicted, the deficit grows even after they've breathed their last, because money that was supposed to be invested and earning interest has instead been paid out to these Methuselahs.

    No, I'm afraid the deficit is quite, quite real, and the fact that it may turn out to be slightly larger or smaller than now supposed does not change a thing.

  • Comment number 90.

    Just a little bit of facts to go with this anti public-sector rhetoric.

    Ben Goldacre does a fantastic job of proving this idea that the public-sector are any better off than the private is a myth.

    Teachers, police, and doctors get it good, but if you take anyone who is under the Green Book scheme... The vast majority of public sector staff, and those who have just had their jobs reassessed under the Equal Pay and Single Status schemes, they are still, if you add wages and pension together, paid lower on average than their equivalent in the private sector.

    Not that it matters, as the councils are slowly being privatised anyway, and we know how well that has functioned for matters of public service like phones, water, electricity...

    But yes, lets blame the public sector for all our problems and lets ignore just how much has been pumped into the private, and virtually unregulated STILL banking system eh?

    Too much sarcasm?

  • Comment number 91.

    One thing which is becoming increasingly clear is the fact that the State, plcs etc etc cannot be trusted to run pension schemes.

    It is clear that obligations are not enforced in law and that shareholders and employees are not mutually interested parties where this is concerned. It becomes increasingly ironic if OTHER pension funds are major shareholders, thereby setting one company against companies in totally different fields.

    I think the UK will need to go toward a system whereby employees are paid a flat salary, of which 15% must, by law, be put aside, for pension/retirement.

    The paternalistic plc no longer exists and all the pension issues of the past decade result from that.

    Time for a fundamental reform of retirement planning??

  • Comment number 92.

    When BT was privatised it was in the top 10 of World class Telcos. Now it isn't. The new free and private BT was not allowed to compete in the cable market, or undercut the new US financed telcos Maggie licenced. BT lost it's research facilities, it had to put up with an exConservative minister on the board. It has to allow competitors access to its own buildings to attach their kit to BT lines. This is 'privatised'? At the same time a revolutionary change in technology meant massive investment and even more job losses. This allowed people to claim that privatisation had improved the service, when it was new switches.

    BT still hasn't got the commercial freedom any private company would expect to expand or set prices. It seems to me that the privatisation was designed purely to limit BT's potential for benefit of more favoured investors.I don't know why.

    If BT had been allowed to compete fairly it may well have been a world leader, and generated enough profits to pay off it's pension fund, and some of the National Debt.

    Regarding this tactic of constant criticism, I note that the same tactic is continually employed against the PO, the BBC, and now the Met Office. I wonder why?

    The public have over the years been brainwashed into being jealous of anyone with a decent pension, and wanting it stopped, as many post here demonstrate. I suppose it stops them thinking about asking for a similar scheme for themselves.

  • Comment number 93.

    I am self-employed and my copany is only ticking over because I saved in the good times. I have about one more year left for things to pick up before I will have to close my company - maybe sooner.

    I cannot afford to pay my own pension but it transpires that £33 of my £100 per month Council Tax is going to paying the pensions of Council workers in Swansea. It seems my other taxes go to pay the pensions of public sector workers in the NHS, DVLA, etc.

    Frankly, if I now have to bail out the likes of BT then I am simply going to close my business, move overseas to a more fairer economy where I will actually not be forced to provide pensions for others when I cannot afford to do so for myself.

    I know I am not alone amongst self-employed people who feel this way.

  • Comment number 94.

    let's not forget the windfall tax the government placed on BT when the share price was £13, just before the .com crash sending it back to £2 - and the huge amount of money the government made on the sale of the airways with the 3g licence.

    surely, the real root cause is the same issue as endowment mortgages. I got mine in the early 80s, been paying over the odds through all the market good times, and end up owing more money! it is the people making the investment decisions in the wrong, but they are faceless - and probably very rich.

  • Comment number 95.

    Any Government liability for the BT pension fund is of course the Taxpayers liability. Uk Taxpayers are hugely in debt (not the government)I believe that in 1997 BT was subject to a windfall tax? I am sure Mr Peston can remember if that is correct and the £ amount that was taken from BT in this way? There is no such thing as a 'free' tax, someone always pays whether it be the shareholders (ie your pension fund), the customers of the company and/or the staff. Perhaps the amount raised from this windfall tax, which i believe was spent on 'youth training', is the minimum that should be repaid into the BT pension fund ?
    Mr Brown and others (politicans/civil servants) have now come up with a similar idea to tax the banks, it would be as well to remind ourselves that once again that those that pay for this (in the form of increased charges) will be the customers with retail bank accounts, maybe the shareholders but, in this case, certainly not the overpaid bankers.
    Sometimes it is hard to understand how little the economic journalists understand about about the realities of life.
    Perhaps,now,all journalist could start by remembering to use, in most contexts, the word Taxpayer rather than Government so others start to understand its is always us, the taxpayer, who pay.

  • Comment number 96.

    Err piscator re;The public have over the years been brainwashed into being jealous of anyone with a decent pension, and wanting it stopped, as many post here demonstrate. I suppose it stops them thinking about asking for a similar scheme for themselves.

    No private pension schemes for the majority of private workers in the UK can amass the amount that is now being paid to the public sector workers,as it is in fact the private sector that is funding the public sector then it is a simple case of the majority refusing to pay their pensions come election time.

    It's totally hare-brained to suggest that the private sector can all be employed with such lavish pensions as the public sector while lots of public sector employees can still retire well before their 60th birthday's.

  • Comment number 97.

    It's only taken thirty years, but finally a lot of people are waking up to the immense - probably irreversible - damage that Thatcherite free-market dogma has done to this country. Nigel Lawson actually sat on Question Time a couple of weeks ago and boasted of how the Tories had got us out of the recession in the early 80s - presumably conveniently forgetting who got us into it, the four million unemployed that followed, the near-total destruction of our manufacturing industry, and in the long term the over-reliance on a deregulated financial sector and the explosion of credit which led inexorably to where we are now... bust. Privatisation was a just crooked scheme to buy votes and reward their friends in the City, while selling the country's assets for a pittance - conveniently ignoring the fact that if shareholders take a cut, it's impossible that privatised companies can be more efficient than nationalised ones - anyone with a basic understanding of simple science should be able to see that. But then economics is not a science. If it was then economists wouldn't believe that you can create wealth out of fresh air and confidence.

    That's not to say that it even started with Thatcher - if it hadn't been for the total weakness of the 60s and 70s Labour governments in tackling the unions, we wouldn't have been in the position where she looked like a saviour. Heath tried, and failed utterly. Have we actually had a decent government or Prime Minister since Clement Attlee? And what was the most important thing that Attlee's government did? - they nationalised the important industries, natural monopolies and public services. Things that *should*, morally and practically, be owned by the nation, and where the mantra of "competition" is at best artificial and at worst simply a lie. Instead we have the farce of the privatised rail system, of being able to choose which billing company supplies you with exactly the same gas and electricity through the same pipes and wires, of companies like BT being forced to compete with others that never had to invest in the network, of a Post Office that has to shoulder the least profitable elements while private competitors cherry-pick the rest and the regulator hamstrings it so it becomes loss-making and needs to cut costs and services that people rely on... it would be comic if it wasn't so tragic.

    What needs to be done with BT and other privatised monopolies that get into financial trouble is simple - they need to be allowed to go bankrupt, and then immediately bought by the state for their value at the time... ie the shareholders get nothing or very close to it. Tough - investments can go down as well as up. The current government totally dropped the ball by failing to do this when given a golden opportunity when Railtrack collapsed. But then dropping the ball is nothing unusual for this lot - it should have been done with the banks as well.

  • Comment number 98.

    There seems to more black holes in pensions than in the universe and it just may be this is where the cash has gone. £9bn??? When did the actuaries uncover this little lot then? Last week, last year and why did they not flag it earlier? It's a bigger deficit than the Greek economy so who has been in the till?

  • Comment number 99.

    92 Piscator
    This allowed people to claim that privatisation had improved the service, when it was new switches.

    I worked for The Post office telephones and I remember there being a big hip hip when a US company opened a totally electronic exchange. But it could only connect those numbers of its own exchange. The Post Office research was thought to be dullards but within two years they had an electronic exchange that could connect to “any” exchange. These new kids on the block that Maggie licenced get that research technology for free and as Piscator (above) says they claim that Private is better. Who invented Glass fibre cable without which you would not operate your Web and who’s got the patent?

    91R Jagger and 83 Naomiimuse take note
    For forty years I paid a % of my salary into a Post Office Pension the deal was that they chipped in 3.5% to match it. This meant that they had my 3.5% to invest in the business. In about 1955 Selwyn Lloyd refused to honour an arbitration wage claim saying that the arbitrators had missed the fact that the PO was chipping in 3.5%, and we did not get the award. I claim that, that made all of the funds in the pension fund ours, the workers. Now if the BT cheated and took a pensions holiday or two thereby stealing 3.5% from us why should you lot moan.
    At privatisation we had a very good union, (you should all try to get one) who made the deal with Maggie et al. that our pension OUR PENSION should be protected. Millions of you voted for Maggie, so stop moaning about the consequences.
    When privatised the BT Board decided to cut the workforce by 15% and offered early retirement to staff. The inducement was that they would get enhanced years to their pensions, that is if you have done 37 years BT will let it be 40 for pension calculations. But the good Union that I have mentioned, annoyed the Board by noting that it was our pension, OUR PENSION fund from which they wished to take the enhancement money.

  • Comment number 100.

    It's a myth that Gordon Brown as Chancellor raided the pension funds. I wrote an explanation of what he actually did at


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