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UK Roundup: BT, Islington

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UK - BT yesterday announced a £1bn (€1.1bn) reduction in the BT Pension Scheme’s (BTPS) deficit, while also indicating it would fight a recent decision by Ofcom barring it from increasing wholesale prices to close the shortfall.

Speaking of the ruling by the telecommunications regulator, chief executive Ian Livingston said BT planned to make “strong representations” as to why it was incorrect.

He added: “Ofcom came to the wrong answer, and we will be making that very clear and looking at whatever action we need to take on that issue.”

Further, BTPS trustees reported a 13% reduction in its deficit by the end of March 2010, with Livingston saying equity had gone up “very considerably” in value.

The deficit has fallen steadily since the end of 2008, when trustees reported a £9bn shortfall.

Following strong returns of 12% last year, it fell to £7.6bn and now lies at £6.6bn, according to trustees.

However, BT estimates the current deficit to be slightly higher, with its IAS 19 calculations gross of tax placing it at £7.9bn.

Overall, scheme assets fell by £1.4bn to £33.9bn at the end of June, with a simultaneous reduction of liabilities to £41.7bn, down by £1.3bn.

Livingston also spoke of the recent court case brought by the trustees of BTPS seeking clarification on the extent of the crown guarantee, calling it a “very sensible thing to do”.

Earlier this month, the scheme hired Mercer to advise on manager selection and investment strategy.

In other news, the London Borough of Islington awarded two real estate mandates worth £70m to Threadneedle Asset Management and Franklin Templeton for its £531m pension fund.

Originally put out to tender in July last year, the mandates were estimated at £50m each, with one for both UK and global property and the second purely for the UK real estate market.

As the mandates were based on a percentage of total scheme assets, and these fell by 21% between 2007-08 and 2008-09, Threadneedle was only awarded a £45m mandate for UK property, while Franklin Templeton received a £25m mandate purely for global property.

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