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BT has £9bn pension hole

Steve Dinneen
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BT yesterday revealed a yawning pension deficit of £9bn.

Shares in the company – which now has the biggest pension deficit in the private sector – nose-dived as the extent of the black hole was revealed.

The firm announced an agreement with trustees to pay back the vast sum over 17 years, adding £525m into the pot for three years, rising to £583m in the fourth year and then growing at a rate of three per cent a year after that.

But BT admitted the Pensions Regulator had expressed “substantial concerns” with the agreement.
The regulator’s guidelines state a firm should pay back a deficit within 10 years unless it is under particular financial stress.

Analysts yesterday urged BT to add more to the pension pot while the company is in rude health. BT claims the calculation is “cautious” and the true value may be closer to £3bn.

BT’s pension scheme has more than 340,000 members, making it the most highly subscribed in the UK. The pension deficit is the second highest in the UK, behind only Royal Mail, which has a deficit of more than £10bn.

The results place BT’s deficit far beyond the UK’s leading financial institutions, including Barclays at £3.9bn, HSBC at £2.4bn and Lloyds at £1.9bn, although these are expected to almost double when end of year results are published.

BT shares finished trading 8.75 per cent down despite better than expected results yesterday.
BT reported a 39 per cent rise in profits in the third quarter.

This was largely down to improvements in its Global Services wing, which provides IT services to governments and firms including Pepsi and Fiat.