UK - BT has vowed not to raise its prices to plug its scheme deficit despite posting a record £5.7bn FRS17 shortfall.
The telecoms giant said the deficit was “entirely manageable” in the context of its cash-flow and confirmed it will boost its required additional employer contributions of £200m by £32m per year.
However, a BT spokeswoman rejected the use of FRS17 as an accurate indication of the pressure the deficit would put on the sponsoring company.
She said: “The most important thing to look at is the funding valuation – that is the valuation that actually drives cash [which is] £2.1bn.”
Analysts estimated the £26.6bn BT Pension Scheme would reveal a deficit of near £7bn under FRS17, and while the FRS17 deficit net of tax was £6.3bn on March 31, 2003, that number has already reduced to £5.7bn as of May 16.
The decision comes after utility companies Scottish Power, Anglian Water, Northumbrian Water and transport operator Network Rail approached their respective regulators seeking approval to raise prices to plug their schemes’ shortfalls .
The Royal Mail’s £12bn scheme also unveiled its £4.6bn deficit under FRS17, which chairman Alan Leighton admitted poses a considerable ongoing risk for the postal company.
He said: “Our people currently in the scheme should have nothing to fear. We are committed to the ongoing funding of the plan and will manage the shortfall as part of our everyday activities, pumping some £100m into pensions each year until the deficit is cleared.”
*Ratings agency Standard & Poor’s has reaffirmed BT’s A- long-term and A-2 short-term credit ratings, despite the revelations about the firm’s pensions deficit.
Credit analyst Peter Kernan explained: “Standard & Poor’s has reviewed the assumptions that underlie BT’s actuarial pensions deficit, and the way in which the scheme’s funding level is being monitored and managed, and believes them to be reasonable.”
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