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Digital Economy Bill amended to protect Openreach pensions

The government introduces an amendment to the Digital Economy Bill to protect the pensions of BT employees transferring into the newly independent Openreach business

The government has tabled an amendment to the Digital Economy Bill to ensure that thousands of Openreach employees who are currently members of the BT Group pension scheme have their pension funds protected following the legal separation of BT and its arms-length network business.

The future of Openreach’s pension scheme was a key sticking point in the negotiations over the future of the organisation in the wider BT organisation.

The negotiations concluded on 10 March 2017 with the announcement that BT and Ofcom had successfully negotiated a legal split, which will see Openreach function as an independent business while retaining ties to BT.

The amendment will help clear the path towards the legal split by maintaining the Crown Guarantee for BT employees who are transferred to Openreach under Tupe legislation.

The Crown Guarantee is designed to ensure that the government meets BT’s obligations to the pension scheme in the event that the business is ever wound up, however unlikely this might be. The guarantee has been in place since BT was privatised as British Telecom in 1984, and its maintenance was critical in getting BT to agree to the terms of the split.

“This amendment clears a hurdle identified by Ofcom by allowing the government to maintain pension protections for BT pension scheme members who transfer to Openreach. It will help secure the voluntary separation of BT and Openreach and provide peace of mind to affected workers,” said culture secretary Karen Bradley.

“The legal separation of Openreach is important for delivering better broadband for consumers throughout the UK,” she added. “A more independent Openreach which treats every broadband provider fairly should increase investment, bolster competition and help give the country the connectivity it needs.” 

The amendment means the existing Crown Guarantee will be rewritten to apply to affected members of the pension scheme as they move across to the Openreach business, and will be subject to what the government described as the “satisfactory progress” of the legal split.

The split between BT and Openreach is the culmination of a two-year process that kicked off with a strategic reviews of the communications market conducted by Ofcom.

Read more about the BT Openreach split

The regulator hopes that by forcing Openreach to become an essentially independent company, it will free it up to make infrastructure investment decisions that are not influenced by BT and it will speed up the deployment of full fibre broadband services around the UK.

BT's commercial rivals, members of Parliament (MPs) and many communications market observers had argued for a full structural separation that would have seen Openreach completely hived off as a fully independent company with no ties whatsoever to its parent. However, this was ultimately deemed too risky, as it was likely that BT would have tied up the courts for many years with appeals.

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