BT cash call warning after pension turmoil

BT’S pension fund has warned it may need more support from the telecoms giant after losing billions during the mini-budget bond market turmoil.

The scheme, which has almost 270,000 members, said it had become “more cautious” in how it managed liquidity and had increased its collateral buffer as a result of the crisis.

It said the change of approach would help it weather any future volatility in bond markets, but would also reduce the expected returns of its assets.

The pension scheme warned that if returns fell below a certain level it may need more support from BT in future valuations than previously anticipated.

DS Smith, the packaging company, also said it had been forced to lend its pension scheme up to £100m as a result of the turmoil. The cash advance was fully repaid within days of being made, DS Smith said in its half-year results.

In October, BT Pension Scheme Management (BTPSM) revealed it had taken an £11bn hit when Liz Truss’s minibudget caused chaos in bond markets.

A surge in gilt yields forced pension funds to meet collateral calls on their liability-driven investment (LDI) portfolios and prompted an intervention by the Bank of England. BTPSM, which has a funding deficit of £4.4bn, was forced to use cash and sell gilt and equity holdings to meet the shortfall, but did not rely on any cash from BT.

The scheme said: “We have become more cautious in how we manage the scheme’s liquidity and have increased the collateral buffer to which we operate. However, the scheme does need to achieve a certain level of investment return to achieve its 2034 funding targets and if expected returns fall below this level then the scheme may need more support from BT.”

A BT spokesman said: “We remain on track with our plan to eradicate the BT pension Scheme funding deficit by 2030, despite the recent volatility.”