St Clements House - Bristol

Section A

2014 Court of Appeal decision

Members will be aware, on privatisation of BT in 1984, the Government provided a guarantee to the BT Pension Scheme. The Court of Appeal decision given on 14 July 2014 clarified that the ‘Crown Guarantee’ (as it has come to be known) is only relevant on a winding up of BT plc and, in such circumstances, would cover BT plc’s obligations under the Trust Deed to ensure the Scheme has sufficient funds to pay the accrued benefits (other than some exclusions in relation to certain aspects of the Scheme’s liabilities). It is important to stress that the Crown Guarantee does not cover the liabilities of the Scheme itself and/or the benefits of individual members. Rather it relates only to the obligations of BT plc to the Scheme as a whole and consequently, the Crown Guarantee only remains in place for as long as, and to the extent that, BT plc itself continues to have the obligation to support the Scheme.

The Crown Guarantee is, without doubt, a significant protection for members of the Scheme in the event of the winding up of BT plc, and the clarity provided in the Court of Appeal judgement is helpful in understanding the scope, effectiveness and applicability of the Guarantee.