UK - The Pensions Regulator (TPR) has asked BT and trustees of the £29.3bn (€32.6bn) BT Pension Scheme (BTPS) not to finalise or disclose the results of the latest triennial valuation until TPR has completed discussions regarding the basis of the valuation.
In its preliminary results for the fourth quarter of 2008 and the year to 31 March 2009, announced today, BT confirmed the company and the trustees of the BTPS had "reached an advanced stage in the completion of the triennial funding valuation", which is being prepared by the scheme actuary as of 31 December 2008.
It had been expected the results would be announced alongside the preliminary results, however the statement revealed: "As the parties are at an advanced stage compared to other scheme valuations and given the uncertain market conditions, TPR has indicated it wishes to discuss with the Trustee and BT the underlying assumptions and basis of the valuation".
And it confirmed: "TPR has requested that the valuation and assumptions are not finalised or disclosed in advance of the completion of those discussions. BT, the Trustee and TPR are keen to complete this as soon as practicable."
Commenting on this latest announcement, Jonathan Camfield, partner at Lane Clark & Peacock, suggested TPR's intervention indicated a change of tack in dealing with pensions funding.
"This seems a case of early action by the Pensions Regulator, anticipating a potential challenge, rather than waiting for the trustees and company to strike a deal and then vetting the outcome. This is an example of the Regulator moving to be a "player" rather than simply a "referee" in this challenging financial environment."
Speculation ahead of the publication of the results had suggested the pension deficit might have increased from the £3.4bn deficit reported in the 2005 valuation to between £8-11bn following the recent market turmoil.
However, figures included in the report noted that on an IAS 19 basis the pension fund had a net deficit of £2.9bn, or £4bn before tax, at 31 March 2009 as the market value of the BTPS dropped from £37.3bn in March 2008 to £29.3bn a year later, although liabilities also declined slightly from £34.4bn to £33.1bn.
The IAS 19 deficit, compared to a net surplus of £2bn in 2008, was calculated using an AA bond rate of 6.85% and an inflation rate of 2.9%, and BT admitted earnings per share "will be impacted by the movement of the net finance expense on the pension obligations", as it moved from a surplus of £313m to a cost of £275m.
The company also confirmed it had reached an agreement with trustees, and received TPR approval, to pay deficit contributions equivalent to £525m a year for the next three years that would allow it to "announce a sustainable dividend policy".
This follows TPR's recent statement to employers on the funding regime in February, in which it warned pension schemes should not suffer to allow firms to pay shareholders dividends. (See earlier IPE article: TPR warns firms not to put dividends ahead of pensions)
Sir Mike Rake, chairman of BT Group, said: "We have agreed with the trustees of the BTPS the pension contributions for the next three years enabling the Board to announce a sustainable dividend policy. The proposed final dividend of 1.1p gives a full year dividend of 6.5p which rebases dividend payments to a level which we are confident is sustainable."
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