BT Pension Deficit Post Brexit.

jennyjj

Has anyone found any articles that explore what effect Brexit might have on BT's pensions deficit?

BT Is still well down on last week and I imagine the uncertainty and risk of lower gilt yields will weigh heavily on it's pension funding.

Or any thoughts out there from deferred members?

Actuarial reduction is starting to feel like a decent option in the face of uncertainty.

Opinions?

Malthusian

BT is required to make good any shortfall in the pension fund. The worst case scenario for BT is probably that it will no longer be able to afford to buy the entire rights to Champions League games so its executives can swank around with Joe Hart and Thomas Müller. We're a long way off the prospect of BT doing a BHS.

BT has significant overseas revenue which will benefit from the weak pound.

And if it does do a BHS the pensioners will go into the Pension Protection Fund. For most people the risks involved in leaving a final salary pension scheme would dwarf the (currently remote) risk of taking a 10% haircut.

agarnett

Obviously lower gilt yields (again) post Brexit have an adverse effect but exactly what effect is probably not disclosed for months and years afterwards.

Doesn't BTPS have a Crown Guarantee in the event of BT winding up? (rather than PPF?)

kidmugsy

The long term fate of DB pensions depends on much bigger forces than Brexit.

greenglide

And if it does do a BHS the pensioners will go into the Pension Protection Fund.

But how would the PPF pay for a huge scheme like BT failing?

The remaining private sector DB schemes have to pay for this. It is therefore crucial that the remaining DB schemes are not allowed to fall into the PPF simply as a way of getting rid of them.

It would take something truly momentous for BT to fail though and it is failure of the sponsoring employer that trigger this.

BT is somewhat larger (and currently more successful) than BHS!

Browntoa

looks like the worry is it will be made up by cutting the dividend


http://www.telegraph.co.uk/business/2016/06/28/bt-shares-hit-as-brexit-renews-fears-over-106bn-pension-black-ho/


http://invezz.com/news/equities/23580-BT-share-price-suffers-as-Brexit-vote-renews-pension-black-hole-fears


http://www.telegraph.co.uk/business/2016/05/28/bt-pension-black-hole-risks-dividends/

Andy_L

agarnett wrote: »

Doesn't BTPS have a Crown Guarantee in the event of BT winding up? (rather than PPF?)

Yes, so the PPF doesn't care

"on privatisation of BT in 1984, the Government provided a guarantee to the BT Pension Scheme. The Court of Appeal decision given on 14 July 2014 clarified that the ‘Crown Guarantee’ (as it has come to be known) is only relevant on a winding up of BT plc and, in such circumstances, would cover BT plc’s obligations under the Trust Deed to ensure the Scheme has sufficient funds to pay the accrued benefits "

http://www.btpensions.net/192/crown-guarantee

agarnett

kidmugsy wrote: »

The long term fate of DB pensions depends on much bigger forces than Brexit.

Does it? Well the GBP in UK DB schemes is currently worth 16% less than I was enjoying in Europe a matter of just months ago.

It isn't fashionable to question currency fluctuations as problems of investment (except when you want to argue business as usual/BT has lots of foreign currency earnings).

If that's true (about BT's foreign currency earnings), it might even be argued that BT is probably laughing over Brexit because all its deferred pensioners only have their eye on the GBP ball when it comes to assessing their own net wealth.

I suggest that unless BT pensioners or any other pensioners are living in a cave somewhere in UK, and scarcely come out then they ought to be looking at why suddenly the world thinks GBP is worth so little compared to the currencies you need to enjoy life to the full by getting off of this stupid little island occasionally.

jennyjj

Malthusian wrote: »

And if it does do a BHS the pensioners will go into the Pension Protection Fund. For most people the risks involved in leaving a final salary pension scheme would dwarf the (currently remote) risk of taking a 10% haircut.

Do I understand correctly that members 'in payment' have stronger rights to continued full payment than deferred members, who would be more likely to get that haircut?

Malthusian

I wasn't aware of the Crown guarantee. However, the taxpayer would probably foot the bill anyway one way or another.

jennyjj wrote: »

Do I understand correctly that members 'in payment' have stronger rights to continued full payment than deferred members, who would be more likely to get that haircut?

Yes, pensions in payment continue 100% (their inflation-linked increases are however capped), unless you took early retirement. Those who retired early and those who have not yet drawn their pension receive 90% (and are also subject to a cap, and the same restriction on inflation increases). More details here.

agarnett

You've answered the OP with a link to PPF, Malthusian ... and whilst I agree that one way or t'other, the taxpayer foots the bill in event of BT wind-up, I thought you'd agreed that we've worked out that because BTPS is a special case, PPF probably doesn't apply, n'est-ce pas?

BT peeps are protected by the Crown Guarantee, and unless that works the same as PPF, then surely PPF treatments are irrelevant in this case? ... Just saying ...