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Hogan Lovells Successfully Acts on BT Crown Guarantee Pension Case Against the UK Government

21 October 2010

LONDON, 21 October 2010 - The High Court today gave judgment in an important pension case against the UK Government.  The claim was brought by the Trustee of the BT Pension Scheme, which was represented by Hogan Lovells' Pensions Litigation practice.

Nicholas Heaton, a partner in Hogan Lovells' Pensions Litigation practice, who led on the case for the Trustee, says:

"This is a good result for the Trustee and members.  Not only does it bring greater clarity as to extent of the Government's obligations, but the outcome is favorable to scheme members.  We are delighted to be acting for the Trustee, a longstanding client of the firm, in this very important case"   

The Trustee has today issued the following statement about the judgment: 

"The High Court today gave judgment in an important pension case against the UK Government.  The claim was brought by the Trustee of the BT Pension Scheme (BTPS). 
The claim relates to the scope and extent of a guarantee (known as the Crown Guarantee) given by the UK Government on the privatisation of British Telecommunications ("BT") in 1984 and would only come into effect if BT becomes insolvent.  The Crown Guarantee requires the UK Government to pay any outstanding liabilities, transferred to BT on privatisation, for the payment of pensions.
The BT Pension Scheme is the UK's largest private sector pension scheme, with assets of over £33.9 billion and more than 340,000 members as at 30 June 2010. 

The claim was brought by the Trustee to clarify the scope and extent of the Crown Guarantee, not because of concerns over BT's solvency.  It is also important for members of the scheme to understand the scope of the ultimate protection that the Crown Guarantee provides.

The High Court's judgment today addresses the two central issues in the case.  First, does the Crown Guarantee cover the benefits of members whenever they joined the scheme, or only those who were already members at the time of privatisation in 1984? 

The second issue was whether payments that the Government must make into the scheme when the Crown Guarantee is triggered are to be measured by reference to the cost of buying annuities from an insurance company to meet the relevant benefits in full.

The Judge decided in favour of the Trustee on both issues, ruling that the Crown Guarantee can cover members who joined before and after privatisation and that the payments to be made by the Government under it must be measured on the annuity basis.  

The Court also decided one other issue in its judgment.  It decided that the Crown Guarantee does not cover the benefits of members accrued while in service with companies that participate in the BTPS other than BT if the member concerned had not previously been employed by BT.

The judgment was the first stage in the case and leaves further issues to be resolved at another hearing, including a number concerning whether certain benefits and classes of member are covered.  Until these issues are resolved it is not possible to say with complete precision what the scope of the Crown Guarantee is. The Judge today, however, has resolved the two most important issues in the case in favour of the Trustee.  It is possible that the High Court's decision may be subject to appeal.

This is a good result in that it provides further clarity as to the extent of the Crown's obligations for members of the BTPS and it is favourable for members."

Notes to editors

1. The Hogan Lovells team was lead on the contentious side by partner Nicholas Heaton with senior associate Paul Chaplin and on the non-contentious side by partner Jane Samsworth with senior associate Edward Brown

2. Hogan Lovells’ Pensions Litigation Practice is widely recognised by the independent legal directories as being a clear leader in this field, a position it has occupied for several years.

3. Over the past year the practice has handled some of the most significant cases in the market including acting in relation to the IMG Pension Plan case as well as the Pilots' National Pension Fund (PNPF) litigation.  Our clients come from all areas of the pensions market and include leading independent trustees, trustees of some of the largest schemes in the country, sponsoring employers in all sectors, including manufacturing, media and financial, bodies involved in the regulation of pensions schemes, members of schemes and pensions professionals (including actuaries and solicitors) and their insurers.

4. Hogan Lovells is a new law firm combining the breadth of business-oriented legal advice and high-quality service that clients have come to expect through working with its two founding firms – Hogan & Hartson and Lovells.
Hogan Lovells (the "firm") refers to the international legal practice comprising Hogan Lovells International LLP, Hogan Lovells US LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses, each of which is a separate legal entity. Hogan Lovells International LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia.

The word "partner" is used to refer to a member of Hogan Lovells International LLP or a partner of Hogan Lovells US LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of their affiliated businesses who has equivalent standing.  Rankings and quotes from legal directories and other sources may refer to the former firms of Hogan & Hartson LLP and Lovells LLP. Where case studies are included, results achieved do not guarantee similar outcomes for other clients.

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