BT pension reassurance
REASSURANCE has been issued today after telecoms giant BT today revealed a £1.5 billion black hole in its pension fund for 2002.Falling stock markets have slashed the value of pension fund investments, hitting many major companies which have already revealed gaping holes in their pension funds.
By Tracey Sparling
REASSURANCE has been issued today after telecoms giant BT today revealed a £1.5 billion black hole in its pension fund for 2002.
Falling stock markets have slashed the value of pension fund investments, hitting many major companies which have already revealed gaping holes in their pension funds.
Yesterday GlaxoSmithKline reported a £1.3 billion deficit in its fund.
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BT, which is based at Adastral Park, Martlesham, said its actuary had examined the valuation based on accounting rule SSAP 24 which will be applied from April 1.
The rules require a snapshot picture of the pension position which some companies complain makes their financial position look worse than it is. For BT it reveals a deficit position which has become ten times worse in just three years.
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While the pension funding valuation will not be announced until May, BT said the deficit would be in the range of £1 billion to £1.5 billion, compared with the £200 million deficit at March 31, 2000, following the previous valuation.
Since 1999 the company has been pumping £200 million a year into its fund by way of a top-up. It has not yet said whether it will need a further cash injection.
Despite the deficit, BT's 346,000 fund members along with current employees and shareholders were given some reassurance today.
A spokesman for the National Association of Pension Funds said: "Like other pension schemes BT has suffered the consequences of the falling stock market but this doesn't mean that BT pensioners will lose out. BT is putting in money to make good any deficit. In practical terms the only way pensioners would lose out is if all BT's staff retired today."
The company added that the previous year's profit had been boosted by one-off gains.
Underlying pre-tax profit for the quarter to December rose 37% to £521 million, at the upper end of market expectations. Turnover rose 1% to £4.7 billion.
Chief executive Ben Verwaayen said: "These are excellent results. We are achieving our key goals of improving cash flow, earnings per share and customer satisfaction. These results demonstrate a substantial increase in profitability, with earnings per share growth of 71%.'
The company also generated its highest sales of the broadband technology, with more than 25,000 connections per week in January. A major broadband marketing campaign was launched and BT cut wholesale and retail connection charges.