BT’s total pension deficit stood at £1.1bn at 31 March 2020, down from £7.2bn the year before, as liabilities dropped from £59.4bn to £53.3bn, according to its full year results.

The telecoms giant said that the £6.1bn reduction in deficit mainly reflected an increase in the real discount rate, deficit contributions paid over the period and positive asset returns.

The BT Pension Scheme’s (BTPS) assets remained unchanged at £52.2bn.

Even so, the company warned that interest rates were “extremely volatile in the current markets” and so it estimated that its deficit will have “materially worsened since 31 March, principally reflecting the subsequent fall in credit spreads”.

BT said: “Our defined benefit pension schemes, in particular the BTPS, could become more of a financial burden as a result of future low investment returns, changes in inflation expectations, longer life expectancies, a more prudent approach being taken (e.g. if BT’s financial strength is viewed as having worsened) and/or regulatory changes.”

With regard to regulatory changes, BT added that one of its key areas of focus for the new year would be to review and prepare its response to relevant consultations.

These included those relating to RPI reform and the funding regime for defined benefit pension schemes, which aim to support The Pensions Regulator’s (TPR) aim of being 'clearer, quicker and tougher'.

The next triennial funding valuation for the BTPS is scheduled to take place at 30 June 2020, with BT aiming to complete discussions in the first half of calendar year 2021.

Looking ahead to this, the FTSE 100-listed company commented: “We note TPR is currently consulting on a new statutory funding regime. While any new rules are not currently due to take effect until late in 2021, the impact of the new regime will likely feature in upcoming discussions with the trustee.”

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