Government faces £23bn pension bill if BT fails

The UK government would have to cover the majority of BT's pension liabilities if the company ever went bust, the High Court ruled today.

The finding said the government guarantee of BT's pension scheme covered both members who worked for the company before it was privatised and those who had joined it since.

The so-called Crown Guarantee was made by the UK government in 1984, when BT was privatised, and only comes into effect if the company becomes insolvent.

The government had previously argued that the guarantee should apply only to pensions accrued by members before the company was privatised, or only cover workers who had joined the scheme before privatisation, which would have put the taxpayer liability at 7.3 billion.

But Mr Justice Mann ruled yesterday that staff who joined the scheme after privatisation were also "capable of being covered".

The judgment also looked at the level of payments the government must make to the scheme if the guarantee was ever triggered, and it was decided that they must be based on the cost of buying annuities to cover members' pensions.

As a result of today's ruling, it is thought the government's liability to the scheme if BT goes insolvent is about 23bn.

But the court ruled that the guarantee did not cover benefits accrued by about 7,000 people who worked for companies other than BT, but who joined the scheme following mergers or acquisitions.

Shares in BT rose by 4 per cent following the ruling.

Nicholas Heaton, of Hogan Lovells' pensions litigation practice, which represented the trustees, said: "This is a good result for the trustees and members."

A BT statement said: "BT welcomes the fact that the judgment provides our employees and members of the BT Pension Scheme with further clarity regarding the extent of the government's obligations."