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BT announces profits fall but pension fund concerns are greater

Despite announcing first-quarter figures which showed profits down 45%, it is the issue of BT's final salary pension scheme which is causing more concern amongst investors. This is the largest UK final salary scheme in existence and is currently said to be around £8 billion in deficit. Even though the figure of £8 billion may well have fallen after the recent run of the UK stock market, there are concerns that the figure could be as high as £10 billion when a full detailed investigation is carried out next year.

A mixture of reduced returns on investments and low interest rates on investment bonds will probably be behind any potential increase in the deficit. However, even though it will take many years to repair the £8 billion deficit, the company has been assured by the Pensions Regulator that annual payments will not top £525 million a year as the company attempts to plug the gap.

It is also interesting to see that after a period of relatively high investment in the company's services, BT will be reducing investment funding this year which should free up around £1 billion of capital - which could be used to address the company's pension scheme situation.

Watch this space..........

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