BT shares fell sharply after the telecoms group revealed the “substantial concerns” of the pensions watchdog over a deal to plug its record £9bn pension scheme black hole.
BT said it had won the support of pension trustees for a 17-year plan to tackle…
BT shares fell sharply after the telecoms group revealed the “substantial concerns” of the pensions watchdog over a deal to plug its record £9bn pension scheme black hole.
BT said it had won the support of pension trustees for a 17-year plan to tackle the massive deficit, which will see it pump in £525ma year for three years, rising to £583m in the fourth year and then grow at a rate of 3% annually after that.
But the company admitted that “the Pensions Regulator’s initial view is that they have substantial concerns with certain features of the agreement”.
The plan is still under review with the regulator and may take a “long, long time” to complete, according to BT’s boss Ian Livingston.
BT shares slumped 9% on the pension uncertainty, which overshadowed third quarter figures showing a 39% leap in underlying pre-tax profits to £466m.
The pension deficit, based on a triennial valuation at the end of 2008, is the biggest ever recorded by a UK private company. And although a private sector scheme, it has unprecedented protection that would see the taxpayer cough up should BT go bust under a guarantee made by the Government when BT was privatised in 1984.
BT said it had agreed a “prudent” funding plan with trustees, which was secured just a month ahead of a March 31 deadline. Rod Kent, chairman of the BT pension scheme trustees, said there had been “exhaustive” efforts over the last 18 months to reach the funding milestone at a time of unprecedented financial turbulence.
He added the agreement “secures significant additional support” for the scheme’s 340,000 members. Mr Livingston sought to assure that recent improvements provided enough cash to support the pension payment plan, as well as shareholder dividend payouts, investment in the business and debts.
He confirmed the group made its first £525m pension fund payment in December. However, resistance from the Pensions Regulator poses a significant threat, given that it has the power to step in and demand changes.
Neither BT nor the regulator would comment on what the “substantial” concerns were, with the pension watchdog saying only it was “aware of the announcement from BT and this is a correct reflection of the current position”.
