BT pension scheme may need more 'support' from telecoms firm - report

BT Group’s pension scheme has told politicians it could require more support from the telecoms group after it made changes to its investment strategy.

According to the Financial Times, the BT Pension Scheme Management said in a written submission that it had adopted a more cautious approach in the wake of recent gilt market volatility, including making changes to its liability-driven investing (LDI) strategies.

The BTPSM told MPs: "We have become more cautious in how we manage the scheme’s liquidity, and have increased the collateral buffer to which we operate. This will position the scheme to better weather any further volatility in the gilt market but will also reduce the expected returns from our assets."

Should those returns fall below a certain level, it added, it may need "more support from BT in future valuations than previously anticipated".

The £47bn defined scheme has 270,000 members and a £4bn deficit. It is one of the largest in the country.

In a statement, BT - which is currently looking to cut costs - told the FT: "We remain on track with our plan to eradicate the BT Pension Scheme funding deficit by 2030, despite the recent volatility in the gilt markets and subsequent impact on the LDI market."

MPs are investigating the turmoil which engulfed the gilt market earlier this autumn. Markets reacted poorly to the government’s mini-budget, which included £45bn of unfunded tax cuts but no spending plans or economic forecasts.

As gilt yields rose, a number of pension schemes that had been using LDI investments to help hedge interest rate and inflation liabilities were forced to sell assets to meet urgent collateral calls. Eventually the Bank of England stepped in to steady the market.

According to the FT, the value of BT’s pension scheme fell by around £11bn as it used cash and sold gilt and equity holdings to meet collateral calls.