UK – The funding shortfall at one of the UK’s largest pension funds, the £38bn (€48bn) BT Pension Scheme, has increased by a third despite a £2bn deficit payment by its parent company earlier this year.
According to quarterly figures released by telecoms provider BT, liabilities in its main defined benefit pension fund rose by £1.9bn between the end of June and the end of September to £42bn.
The increase was only partially offset by a £500m rise in assets under management, resulting in a IAS19 net of tax deficit of £3.1bn.
“The higher deficit reflects the impact on liabilities of a reduction in the discount rate, partially offset by a reduction in the RPI inflation assumption, and a reduction in the long-term assumption for the CPI/RPI differential,” the company’s third-quarter results noted.
BTPS’s nominal discount rate has steadily fallen over the past three quarters, while the real discount rate employed in September is roughly on par with figures for March, but 19 basis points below the June figure.
BT has seen its scheme deficit fluctuate drastically from quarter to quarter in recent years.
In early 2010, the company acknowledged that the Pensions Regulator had “substantial concerns” about a funding agreement to address its deficit, but a review was suspended after the deficit fell in 2011.
As part of its recovery plan, BT earlier in the year contributed £2bn to BTPS, at a time when the scheme was reporting a £4.1bn deficit.
In other news, the Office of National Statistics has announced the launch of a further measure of UK inflation, a modified version of the consumer prices index (CPI) that accounts for the housing costs of property owners resident in their property.
“The new index, which will initially be known as CPIH, will measure [owner occupiers’ housing] costs using the rental equivalence method,” the ONS said. “This method uses changes in rental prices to measure the costs of owning, living in and maintaining a property.”
The agency said the new measure would be introduced in March next year.
Less than a month ago, the ONS announced a review of the retail prices index that the National Association of Pension Funds said could have “huge implications” for pension funds.