Tens of thousands of members of BT's final salary pension plan could be hit with lower payouts as the telecoms giant looks to fill a massive hole in the scheme.
The firm will seek approval to switch the rate used to calculate pension increases for about 80,000 members from the retail prices index (RPI) to the lower consumer prices index (CPI) in a High Court hearing later this year.
The move will mark the biggest step yet taken by Gavin Patterson, BT's chief executive since 2013, to get to grips with the huge pension bill.
The company is currently conducting a review of its retirement scheme which occurs once every three years. The results are due in the middle of next year, and the Sunday Times has reported the figure is expected to jump from £7bn to as much as £14bn.
A spokesperson for BT said:
As part of the pensions review, we’re reviewing the use of RPI as the index for calculating increases to pensions in payment for Section C members in the BT Pension Scheme, and liaising with the BTPS Trustee about this. The scope of this review includes the future increases received on benefits already built up in the BTPS, including by Section C members who have left BT and those who are currently receiving a BTPS pension.
Having agreed the approach with the trustee, we are seeking clarity, through a court application, on whether it’s possible to change the index.
Shares in the leading telecoms provider have nearly halved since the company's stock reached a high of almost 500p in 2015 following an accounting scandal at its Italian business which has dented profits.
In July, the company revealed quarterly pre-tax profit was down 42 per cent.
The majority of BTPS members have been receiving pension increases using the CPI index since BT cut benefits for more than 200,000 staff in 2010. It followed the government's decision to alter pension increases for public sector workers from the RPI to CPI benchmark.