On the go: The £46.9bn BT Pension Scheme sustained an £11bn hit to its assets following the government’s September “mini” Budget, before the Bank of England intervened to stabilise gilt markets.
Defined benefit pension schemes have scrambled to secure liquidity after liability-driven investment managers issued collateral calls in response to spiking gilt yields, which followed the government’s September Budget. Markets reacted negatively to a package that included unfunded tax cuts, which have now almost entirely been reversed.
The largest company DB scheme in the UK October 18 released its annual report, which recorded a £10.4bn fall in assets in its year to June 30 2022.
This movement was “largely driven by the performance of our liability-hedging investments,” BT’s trustee board chair, Otto Thoresen, wrote in the report.
The scheme’s technical provisions deficit stood at £4.38bn, compared with its last formal valuation of £7.98bn at June 30 2020.
BT admitted, however, that its assets had taken a sizeable hit following the September Budget.
“Prior to the Bank of England’s gilt market intervention, there was an estimated £11bn fall in the value of the scheme’s assets,” the report stated.
“Our hedges have continued [to] perform as expected, and up to the date of signing there has been no worsening in our estimated funding position.”
Some schemes have approached employers for the advancement of contributions or other forms of liquidity, with the desire to preserve hedging ratios. Pensions Expert is aware of at least one employer having offered contributions to its scheme for the same purpose.
The BT scheme received £900mn in employers’ deficit funding contributions to the scheme in its year to June 30 2022.
