Officials at the £29bn British Telecoms Pension Scheme are seeking £1bn worth of "special payments". But they warn it may not be enough to plug the scheme's shortfall.
In the last 12 months the financial situation of the scheme has worsened by almost 50pc and officials fear the shortfall could get larger. A BT spokesman warned: “While BT is paying £200m a year to pay off the deficit of nearly £1bn as at end of 1999, if poor investment returns were to continue, that deficit could keep growing.”
The shortfall has increased to just over £1.4bn which emerged from the fund’s last informal valuation of the fund – end of December 2000 – that there was the potential for an additional shortfall of £429m, in addition to the existing £982m.
The spokesman added: “Any uncertainty of cost is going to be an issue for any employer. One cannot say whether the final salary scheme costs will increase or reduce. The total costs for the scheme should certainly reduce because there will be no new members coming in and accruing benefits under the existing scheme.
“The costs for the future for the DB scheme very much depend on investment returns and the increases in life expectancy.”
In 1999, BT said that it was committed to paying £200m a year for five years or until the scheme returns to 100pc funding levels. The payments have increased to £300m – paid in March this year – as a response to the likelihood of a further potential shortfall.
It has been claimed that the shortfall is because of disappointing stock market performance and the additional costs incurred due to redundancy strains and increased life expectancy.
“The fact that people are living longer has increased the estimate for expectation of life of our members by over three and a half years”, the spokesman added.
BT claim that there is no possibility of the scheme being unable to pay its pensioners.
The debt-laden telecom company has also started to increase its contributions from 9.5pc pay to 11.6pc, effective from April 1 this year. The company has also closed the final salary scheme to new members from March 31 in favour of a defined contribution scheme.
The spokesman added: “It is fair to say that any employer would find a significant increase in pension costs unwelcome. They need to be able to plan their costs and this is something that cannot be done with any accuracy in a DB scheme.”
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