Connected Research

Union policy research in the 21st century

BTPS triennial valuation

with 2 comments

The triennial actuarial valuation of the BTPS – the regular snapshot of the assets and liabilities of the scheme – which both sets the contribution rate that must be paid in respect of future service as well as assessing any deficit (or surplus) arising from assumptions about past service not being accurate – was due as at the end of December 2008. Often, it is published at the same time as the annual results announcement, although this was not the case in respect of the December 2005 valuation, owing to ongoing discussions with the government over the extent of the Crown Guarantee to pre-privatisation employees, and it was not this time either.

The valuation – which is the key assessment of the health of the scheme and the one which sets future policy in relation to the scheme, as opposed to the figures produced for the company’s shareholders according to accounting standards which are made on a different basis – remains awaited, although it has reached ‘an advanced stage’. This may very well produce a different figure about the deficit existing within the scheme to the one reported in the accounts, and to which the company will also need to react.

In the meantime, what we do know from the company’s results announcement this morning is that the company has agreed with the Trustee of the scheme (the Trustee is a corporate trustee the directors of which are made up of company and member nominees) to make payments of £525m over each of the next three years. This is a step up from the annual £280m which the company has been making in a ten-year plan in respect of the past service deficit arising from the last actuarial valuation. However, this represents only the effect of the true-up, true-down mechanism agreed at the time of the last valuation and under which the annual deficit contributions could be stepped up or stepped down (but never below the £280m floor) where the investment returns earned by the scheme fluctuate from a central figure of 3.2%.

Concerns had been expressed in the run up to the results announcement over the impact of the mechanism on shareholders’ dividends (although much of the media comment was not particularly well informed). In the end, it appears that the company believes this figure is sustainable in this particular context and still enables the company to pay a dividend the level of which it is confident is similarly sustainable.

Pending the publication of the valuation, BT’s accounts do contain a figure for the values of the assets held by the BTPS as being £29.3bn – we might well note in this context that the pension scheme is valued at four times the value of the market value of its sponsor this morning.

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Written by Calvin

14/05/2009 at 12:17 pm

2 Responses

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  1. Thanks Calvin. Just showing thatI’ve had a look. Good work. Excellent development!! Thanks a lot

    denise

    16/05/2009 at 2:26 pm

    • While analysts may have been asking what the impact of increased pension contributions may be on dividends, BT employees are asking what the impact is going to be on job security and the availability of money in the future for pay rises. Of course, the changes to BT pensions are supposed to mean that our pensions are secure for the future and that the BTPS is now sustainable – but will BT stick to their side of that bargain?

      martin

      18/05/2009 at 10:31 pm


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