The U.K. government lost a court fight to limit its liability for BT Group PLC’s employee pension plan if Britain’s largest phone company were to collapse.
The government may be liable for the pensions of workers who joined after the operator’s privatization in 1984, as well as those hired before then, Justice George Mann at the High Court in London ruled Thursday.
The London-based pension plan is the U.K.’s largest, and had a £7.6 billion ($12 billion) deficit at the end of last year, according to its trustees’ annual report in June. The government guaranteed the plan when the company was privatized. The trustees of the plan brought the case against to government to clarify the scope of the guarantee, Mr. Mann said.
“This litigation was not brought because there are any fears of BT’s insolvency,” he said, when giving his ruling. “These are technical matters and not of immediate or direct impact on the fund.”
While BT is committed to £525 million a year in deficit-repair payments, a court ruling on the so-called Crown Guarantee may allow the pension trustees to reduce BT’s contributions when the next valuation of the fund takes place in December 2011, Fitch Ratings said in a note before the July hearing.
“We are currently taking legal advice based on this judgment and will decide next steps in due course,” said the U.K.’s Department for Business, Innovation and Skills in an e-mailed statement.
The “judgment provides our employees and members of the BT Pension Scheme with further clarity regarding the extent of the government’s obligations,” BT said in an e-mailed statement.