BT pension deficit concerns investors
Despite profits surging ahead at British Telecom the company's share price took a significant hit this morning on news of a £9 billion deficit in the company's pension scheme. The deficit was calculated at the end of 2008 and while it will have changed slightly over the last 12 months it is still causing massive problem for the company and the pension trustees. So what is BT proposing?
British Telecom has already put together a 17 year recovery plan which would see the company injecting £525 million a year for 17 years. However, despite gaining the consent of the pension trustees (and who are totally independent of British Telecom) the Pensions Regulator has stepped into the fray and suggested the deal should be revised. It is unclear exactly what concerns the Pensions Regulator has but it is clear that the deal will need to be amended and discussions between BT, the pension trustees and the Pensions Regulator are continuing.
While the BT scheme was closed to new members in 2001 there are nearly 3 times as many pensioners receiving benefits as those contributing to the scheme. The size of the deficit will inevitably impact upon the company's profitability and ability to pay dividends in the short to medium term with £525 million a year set to be redirected towards the pension fund.
Share this..
Related stories
Should you risk a last-minute holiday?
If there's one area of the UK household budget which appears to have avoided the cutbacks seen in many other areas of everyday life it is the annual holiday. It seems that more and more people in the UK are ready and willing to put aside their financial problems for their two weeks in the sun. However, should you risk a last-minute holiday and attempt to save some money? While there are obvious...
Read MoreGeorge Osborne wary of union fight back
As George Osborne gets ready to deliver the most severe UK budget in 30 years, the UK government is ever more aware that unions are waiting on the sidelines looking for an excuse to ballot members for strike action. As a consequence there will inevitably be more strikes in the second half of 2010 as David Cameron and George Osborne look to push through the £60 billion in cost savings. But can the...
Read MoreCan Labour afford to keep increasing investment in public services?
In many ways the Labour Party has made a rod for its own back as public spending investment has been one of the central planks of both new Labour and old Labour. This is one of the areas of investment which differentiates the Labour Party from the Conservative party and even though Alistair Darling and Gordon Brown are well aware that investment should be cut in the public sector they very much ha...
Read MoreLondon housing market facing “natural correction”
28/05/2014 The London housing market could slow down as a result of a “natural correction” to inflated house prices. House prices have increased nationwide recently, with this effect being particularly exacerbated in the London area. However, Graham Beale, the Chief Executive of mutual building society, Nationwide, has said there has already been a “slowing down in the market place...
Read MoreWhen can you expect energy prices to fall?
We have seen the latest fall in the rate of inflation, we have seen the fall in the price of oil yet there is no sign that energy prices are going anywhere but up in the UK. The government has been under pressure for some time now after promising to place pressure upon the energy providers and ensure that consumers were presented with falling energy costs.
After Gordon Brown has fin...