On the go: BT has estimated that its defined benefit pension scheme’s unquoted assets portfolio has lost £500m due to the negative impact of the Covid-19 pandemic.
In its financial results for 2020, published on Thursday, the telecommunications company stated that its DB schemes had a deficit of £1bn net of tax under IAS 19 at the end of March, down from £6bn in the previous year.
However, with interest rates being “extremely volatile in the current markets”, BT is estimating the deficit “will have materially worsened since March 31, principally reflecting the subsequent fall in credit spreads”.
The company, which sponsors the BT Pension Scheme and some smaller legacy plans, stated that it had £6bn of unquoted assets initially measured using the most recent valuations.
As these figures precede the negative impact of the Covid-19 crisis on financial markets, BT is estimating that the value of these assets has dropped by £500m, already reflected in the IAS 19 position at the end of March.
BTPS had £52.2bn in assets and £53bn in liabilities at the end of the first quarter of 2020.
In its risk outlook, BT stated that its DB schemes, in particular BTPS, could become more of a financial burden as a result of future low investment returns, changes in inflation expectations, longer life expectancies, a more prudent approach being taken and/or regulatory changes.
The company noted that the risk has increased due to the forthcoming review of contributions for the BTPS as at June 30 2020, and recent market movements following the Covid-19 outbreak.
The next triennial funding valuation for BTPS is scheduled to take place at the end of June, with the company aiming to complete discussions in the first half of 2021.
