BT considers offering trustees contingent asset deal
BT may allow the trustees of its pension schemes to take over some of its assets in the case it fails to meets its pension obligations, the firm has suggested.
The proposal may come as part of its funding plan agreed with trustees of the BT Pension Scheme (BTPS) at the upcoming triennial valuation on 30 June, although details are unlikely to be finalised until the first half of next year.
The company's annual report - published on 25 May, ahead of the funding negotiations - said: "We're considering a number of options for funding the deficit after the next valuation, as at 30 June 2017. These options include considering whether there are alternative approaches to only making cash payments, including arrangements that would give the BTPS a prior claim over certain BT assets."
However, the firm would not reveal which assets it may offer: "We're considering a number of options for funding the deficit after the next triennial pension valuation, as at 30 June 2017 but cannot comment further at this stage."
The same report revealed the 296,000-member scheme, which is partially underwritten by the government, had a £8.6bn deficit on the IAS19 accounting measure, up from £6bn last year and one of the largest in the private sector.
The company has so far this year made £303m of ordinary contributions and £250m of deficit contributions, and expected to pay £850m in total this financial year.
Lincoln Pensions director Richard Farr welcomed the company's proposal to use alternative routes for funding.
"We welcome the fact that BT are considering using contingent assets to provide the trustees with additional covenant protection at a time when cash is so clearly tight," he said. "There are many existing and developing products and structures in the market that can be used.
"The key question is what value and flexibility can BT obtain from the negotiations and how will the stock market price the impact on BT's ability to manage its business effectively?"
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