Telecoms giant BT is considering offering the trustee of its pension scheme some of the company’s assets as a way of managing the company’s pension deficit.

The scheme is due to begin its triennial valuation on 30 June but in its annual report the company noted that it may need to increase deficit payments into the scheme if there is an increase in the deficit.

“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. We’re considering a number of options for funding the deficit after the next valuation, as at 30 June 2017.

"These options include considering whether there are alternative approaches to only making cash payments, including arrangements that would give the BTPS a prior claim over certain BT assets," the report said.

Commenting on the reports, Lincoln Pensions director Richard Farr said: "We welcome the fact that BT are considering using contingent assets to provide the trustees with additional covenant protection at a time when cash is so clearly tight.

“There are many existing and developing products and structures in the market that can be used. The key question is what value and flexibility can BT obtain from the negotiations and how will the stock market price the impact on BT's ability to manage its business effectively."

In addition, JLT Employees Benefits director Charles Cowling noted that BT is one of the largest pension schemes in the UK and is one of a handful of FTSE 100 companies to have a pension scheme, which is bigger than the equity market cap of the company.

“Alternatives to cash payments make sense for lots of companies (including BT) and BT would be following a long list of companies that have made use of alternative and contingent assets in response to growing pension deficits.”

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