On the go: BT has cut its defined benefit pensions deficit by £4bn in the year to March 31 2022, a fall partly attributed to a higher discount rate due to increased yields.
According to the UK telecoms provider’s latest financial results, the scheme’s gross pensions deficit under the IAS 19 accounting assumptions fell to £1.1bn at the end of March 2022, from £5.1bn in the previous year.
BT, which previously had one of the biggest pensions deficits in the world, said this was also down to positive asset returns, an increase in deficit contributions, and a change in demographic assumptions including a slight reduction in members over the year to March 31 2022.
In the year to June 30 2021, the number of active BT Pension Scheme members fell from 31 to 23, while the number of deferred members fell from 73,868 to 66,953.
Ben Barringer, equity research analyst at Quilter Cheviot, said the vast reduction in the accounting pensions deficit is a “remarkable turnaround, and if BT can find a way to get it into surplus, it would remove a millstone that has been hanging round the neck of BT for some time”.
However, the BT scheme’s actuarial pensions deficit is expected to be higher than the accounting IAS 19 deficit, with the next triennial valuation due to take place in 2023.
At its last triennial valuation on June 30 2020, the actuarial deficit was £7.98bn, which meant the BTPS was 88 per cent funded.
During that valuation, an asset-backed funding arrangement was agreed to meet £2bn of the pensions deficit, and the employer agreed to provide payments of £180m each year to BTPS over 13 years, secured on EE Limited shares.
The June 30 2021 interim assessment estimated that the funding position had risen from 88 per cent to 93 per cent, representing a fall in the deficit from £8bn to £4.1bn. This improvement was due to deficit contributions and a higher than assumed return on the scheme’s assets.
According to its June 2021 update, BT had made deficit contributions of £2.6bn since June 30 2020, with further contributions of £500mn due to be paid in March 2022 and June 2023, and £400mn in June 2022 and March 2023.
The company will also pay £10mn on March 31 each year from 2024 to 2035, with a final payment of up to £4.7mn due by December 31 2035.
The scheme is expected to reach a fully funded position by June 30 2030.
