BT Group PLC will freeze two sections of the BT Pensions Scheme, London, with future benefits accrued in an "enhanced defined contribution scheme," the company said Monday.
The change applies to two of the three sections of the fund: section B, covering participants that joined the fund between Dec. 1, 1976 and March 31, 1986; and section C, employees that joined between April 1, 1986, and March 31, 2001.
BT said in a statement it had agreed with the Communication Workers Union to establish a hybrid plan, which combines elements of defined benefit and defined contribution.
The changes affect 20,000 non-management employees. In February, the telecoms giant announced it would freeze sections B and C for managers.
The firm intends to freeze the £49 billion ($68.3 billion) fund starting May 31. "However, there are some complex administration-related issues that the trustee is working to resolve. In the event that these issues impact the timetable, we will provide a further update."
BT said that following consultation with its employees it has updated its plans and will make additional transition payments to all former BTPS non-manager participants that are moving into the firm's DC plan — the £1.1 billion BT Retirement Saving Scheme. The corporation will also pay a higher maximum matching contribution rate of 11% for the next five years, a BT spokesman said. The current contribution rate is 8%.
Regarding the establishment of a new hybrid plan, "it is intended that this new arrangement will combine elements of both defined benefit and defined contribution pension schemes and be designed to support those team members on lower pay scales, giving them another option for their retirement savings. The hybrid scheme is intended to offer employees less investment risk over the longer term and will be separate from the BTPS," said the statement.
"These changes also bring far more financial certainty for the company in terms of our future pension arrangements," said Gavin Patterson, BT CEO, in the statement. "This will help us balance the needs of BT pensioners with the investments we are making to future-proof the U.K.'s communications networks and improve customer experience."
BT also said it was enhancing terms for participants already in the DC plan, which new employees have joined since 2009. The plan has 35,500 participants and proposals include increasing the maximum employer contribution to 10%.
A separate statement on the BTPS website said section A of the pension fund, covering employees that joined before Dec. 1, 1971, remains open to future accrual.