We stated our intention to review the treatment of pension costs in May 2009 in the statement 'A New Pricing Framework for Openreach.'
Our initial consultation document published on 1 December 2009 ("First Consultation"), explained the context relating to BT's defined benefit pension scheme and set out the main issues regarding the regulatory treatment of pension costs. In addition we set out a range of high level potential options which we invited stakeholders to comment on and add to.
This further consultation explores the potential options for the treatment of pension costs in more detail, and sets out for consultation our proposed pension recommendations.
In our First Consultation, we stated that we would be looking at three different areas when considering how pension costs affect regulated charges:
We suggested that including full deficit repair payments in regulated charges could increase wholesale regulated charges by up to 4% based on current payments.We also suggested that continuing to exclude deficit repair payments but amending our approach to ongoing service costs and the cost of capital could reduce regulated charges by a small amount.
In the First Consultation, we provided a background to both the UK pension scene and BT's pension position. In addition we set out a range of potential options for the various pension costs, and asked respondents to comment on these, and any other options which they considered to be relevant.
We received a range of responses to our First Consultation which assisted us in forming our thinking for this Second Consultation. There were areas of general consensus and areas of disagreement. We also commissioned and undertook further work, the results of which, in conjunction with the responses we received, have led to our proposed pension recommendations.