Competitors could pay for BT’s pension deficit

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BT’s competitors may have to make up the company’s shortfall for its pension scheme as a result of an Ofcom consultation launched today.

The regulator will decide whether Openreach, the division of BT set up to lease its lines to other providers, should be allowed to increase its prices to make up for the deficit in pensions. If agreed, it could see costs rising by up to four per cent.

BT’s pension scheme had a pre-tax deficit of £9 billion at the end of the last quarter due to three times as many employees taking out from it as current employees paying in.

However, there are fears that increased prices for competitors could lead to increased prices for their customers.

A statement from Ofcom said: “So far Ofcom has not taken a view on whether it is appropriate or not to change its current principles in relation to pension costs.”

“If Ofcom changes its approach, any adjustments in wholesale charges would not necessarily be felt proportionately by consumers.”

A BT spokesperson said the company welcomed the consultation and added that the firm considers "it entirely reasonable that we should be able to recover an appropriate share of our pension deficit costs through regulated charges."

"There is good regulatory precedent for pension deficit costs to be recovered in this way in other regulated industries," BT added.

Ofcom is expected to publish a further consultation in Spring 2010 with more statements to follow throughout the year.

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