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BT pension crisis rears its head as profits surge

Alex Scroxton
BT's pension crisis has reared its head once again, spoiling otherwise healthy Q3 results as the telco faced down a potential clash with the Pensions Regulator, which has raised concerns over the scheme's £9bn deficit.

Last May BT committed to pay over £500m per annum into the scheme for three years to 2011, but is now saying that it will pump close to £600m into pensions in 2012, and today conceded that could take until well into the Twenties before it plugs the vast gap.

By this time many of the scheme's 360,000 members will no longer be around.

BT's pension scheme has been in the red since the 1990s, but went further under in the Noughties thanks to the double whammy of rising life expectancy and standards of living.

The Regulator has not gone public over the nature of its concerns but in a statement today BT said "[We] will continue to work with the Regulator to help them complete their detailed review."

Chief executive Ian Livingston said BT was "committed" to meeting its pension obligations as he lifted the lid on the group's third quarter results to the end of December.

Sales across the group fell 4% to £5.19bn but pre-tax profit surged 158% year-on-year to £209m and there were encouraging signs of life at its troubled Global Services division, which continued to claw back its operating losses, up from £511m to £71m year-on-year.

Global Services continued to see improvements from its cost-saving initiatives, and cut 11% out of underlying costs during the quarter, as well as signing new contracts with finance houses Commerzbank AG and Nomura International plc, among others.

BT Retail saw operating profits slump 26% thanks to high levels of SMB insolvency during the quarter. Openreach profits saw a 46% decline while BT Wholesale profits rose 6%.

"We are making progress," Livingston said. "There is still a lot more to be done but our commitment to improved customer service and cost transformation is starting to deliver results and freeing up resources to invest in our future."

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