BT Mulls Asset Deal to Address Pension Debt

UK telecommunications company BT said in its most recent annual report that it was “considering a number of options for funding the deficit” of its £50.1 billion ($64.3 billion) pension plan, which has grown to £7.55 billion.

“These options include considering whether there are alternative approaches to only making cash payments, including arrangements that would give the BTPS [BT Pension Scheme] a prior claim over certain BT assets,” said BT.

The company said the BTPS faces the same risks challenging other UK defined benefit plans, such as low investment returns, high inflation, longer life expectancy, and regulatory changes, which may mean the BTPS becomes more of a financial burden for BT.

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“We have a large funding obligation to our defined benefit (DB) pension schemes,” said BT in its annual report. The largest of these, the BPTS, with approximately 300,000 participants, represents more than 97% of the group’s pension obligations.

The company didn’t elaborate further on the options for funding the deficit.

BT reported that the BTPS’ total assets grew to £50.1 billion from £43.1 billion in 2016. The report comes just ahead of the pension plan’s triennial valuation. The purpose of the valuation is to design a funding plan to ensure that the BTPS has sufficient funds available to meet future benefit payments. The last valuation was performed in June 2014, and the results of the next funding valuation will be made public no later than June 30 of this year. The evaluation took place in March and April 2017.

The deficit at the valuation date will influence the deficit payments the company agrees to make, the company said. Several factors affect the liabilities, including expected future investment returns at the valuation date.

“If there’s an increase in the pension deficit at the next valuation date, we may have to increase deficit payments into the scheme,” said BT. “Higher deficit payments could mean less money available to invest, pay out as dividends, or repay debt as it matures, which could, in turn, affect our share price and credit rating.”

However, BT said in its annual report that “asset returns have been positive over the year with strong returns from equities and government bonds.”

Based on the 2014 funding valuation agreement, the company reported that it expects to make contributions of approximately £850 million to the BTPS in 2017/2018, which is comprised of ordinary contributions of approximately £162 million and deficit contributions of £688 million. This will be reviewed as part of the upcoming funding valuation.

Tags: BT, cash, pension debt

Louisiana’s state pension systems are vital to working families and retirees across the state, serving as key economic drivers, particularly in rural areas, where public pension benefits are a substantial source of personal income and economic activity, according to a new report.

The report, “Pensions in the Parishes 2017,” from the Louisiana Budget Project (LBP), surveyed how the state’s pension systems impact each parish, and shows the combined economic impact of the three largest state retirement systems: the Louisiana State Employees’ Retirement System (LASERS), the Teachers Retirement System of Louisiana (TRSL), and the Louisiana State Police Retirement System (LSPRS).

According to the report, Louisiana’s pension systems pay out more than $4 billion in benefits to 164,000 retirees and their families every year, which translates to 2% of all personal income in the state, up from 1.7% in 2014.

“When considering changes to state retirement systems, policymakers should keep in mind the impact pensions have in supporting local businesses and jobs in every parish across the state,” LBP Director Jan Moller said.

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Moller cited West Feliciana Parish, where payments from the state’s three largest pension systems total 3.4% of all personal income, and nearly 19% of all retirement income.. “That steady source of income is vital to the parish’s economy, where one in five residents live below the poverty line,” Moller said.

The LBP monitors and reports on public policy, and how it affects Louisiana’s low- to moderate-income families.

The report found that payments to retirees in the state’s 14 pension systems account for one of every 10 dollars of retirement income in the state.

“These dollars don’t just sit in savings accounts,” said the report, “but are spent and pumped back into local economies where they have a substantial economic impact, supporting everything from car dealers and restaurants to grocers and hospitals.”

The report also compared the $4 billion economic impact of Louisiana’s pension payouts with the payrolls of some of the state’s largest industries. For example, total compensation for all hospital employees was $5.3 billion, while restaurant and other food service workers made around $4 billion. Workers in the chemical manufacturing industry were paid $3.4 billion in 2015, while employees of car dealers and auto part stores earned a collective $1.8 billion.

Louisiana has four state pension systems, which include LASERS, TRSL, LSPRS, and the Louisiana School Employees Retirement System (LSERS) for non-teacher school employees. There are an additional 10 pension systems for local government employees, such as pensions for district attorneys, firefighters, and municipal workers.

Tags: LASERS, LBP, Louisiana Budget Project, LSERS, LSPRS, Pensions in the Parishes, poverty, TRSL