UK – The £36bn (€53bn) BT Pension Scheme almost doubled its actual return on assets in the year ending March 31 - to just over £6.9bn (€10.2) from £3.5bn.

“Strong asset growth offset by the impact of longer life expectancy and lower discount rates,” saw the fund’s deficit cut to £1.8bn – roughly half of what it was in March 2005, the telecoms giant said.

A spokesperson for BT also told IPE that rising bond yields and the stock market performance contributed largely to the dropping deficit.

Pensions also cost BT £603m for the year. This is a more than a 10% increase on costs compared to March last year – pegged at £540m.

According to BT, £552m of this was related to the group’s main defined benefit scheme, the BTPS, and £19m went to BT’s main defined contribution scheme.

“The increase in the pension cost in the year principally reflects the introduction part way through the year of Smart Pensions,” said the BT report. This is a salary sacrifice scheme under which employees elect to stop contributions in return for a reduction in gross pay.

BT stated that it expects to make a roughly £630m contribution to the BTPS, including £232m of deficiency contributions over the next year.

Furthermore, mortality assumptions have also been updated to reflect experience and expected improvements in life expectancy after retirement at 60 years of age, said BT.

Average life expectancy now stands at: men (23.8 years); women (25.4 years) versus 23.3 years and 25 years in 2005.

BTPS assets are invested in UK and overseas equities, UK and overseas properties, fixed interest and index-linked securities, deposits and short-term investments.

The BT Group is due to meet with the Department for Trade and Industry (DTI) tomorrow to discuss government’s contribution towards the scheme liabilities.

This follows claims by BT that government has to cover as much as 75% of pension liabilities if the group goes bust under a crown guarantee agreed when BT went private in the 1980s.

According to the BT report: “The triennial funding valuation at 31 December 2005 is currently being performed and reviewed in the context of recent regulatory developments and the impact of the crown guarantee granted on privatization in 1984.”

“We think they government are in broad agreement with us. But it’s tough to say – that is not something that is in our hands,” the spokesperson told IPE earlier this week. BT could not confirm when discussions with government would be concluded.

In other news, the roughly £17bn Royal Mail pension scheme will get a £1.75bn ‘investment’ package from government, to help plug its £5.6bn pension deficit and modernise its service offering.

The package – dubbed by some as a government rescue remedy – consists of a £900m loan and a further £850m from Royal Mail reserves.

The loan – with commercial interest rates – must be repaid by 2013.

Meanwhile, the £850m will be put into a special account for the pension fund – to help reassure pensioners that their savings are safe, said Royal Mail chairman Allan Leighton during a ‘BBC Breakfast’ interview this morning.

Leighton denied Whitehall was ‘bailing out’ Royal Mail. “We’re just like any company, we’re a commercial entity that provides a public service,” he was quoted as saying.