The BT Pension Scheme funding position improved over the past year, despite an £11bn fall in the value of the scheme's assets amid “unprecedented” gilt market volatility.

The scheme’s Annual Report and Accounts 2022 revealed that the deficit reduction plan has remained “on track” despite the recent volatility in the gilt market following the mini-Budget, with the scheme set to be fully funded by 2030.

According to the report, an interim assessment as at 30 June 2022 estimated that the scheme’s funding position had improved from 88 per cent to 92 per cent, representing a reduction in the deficit from £7.98bn in 2020 to £4.38bn as at 30 June 2022.

This improvement was attributed to the deficit contributions paid by BT and a higher than assumed return on the scheme’s assets.

However, the report revealed that the value of the scheme assets has fallen by £10.4bn since last year, reflecting the interaction of the scheme’s assets and liabilities with changes in long term interest and inflation rate expectations.

This was particularly noticeable since the year-end, as “extreme volatility” in the gilt market, and sharp increases in gilt yields prior to the Bank of England’s gilt-market intervention saw the scheme assets fall around £11bn.

Despite this, the scheme emphasised that its hedges have performed "as expected", and whilst the value of the scheme’s assets has fallen over this period, there has been no worsening in its estimated funding position.

The report confirmed that the BTPS Trustee Board is also continuing to update its inflation stress testing and scenario analysis in light of recent announcements, to understand the impact of inflation shocks on the scheme’s portfolio.

"Since the year-end, and up to the date of signing, we saw extreme volatility in the gilt market, with yields rising sharply prior to the Bank of England’s gilt-market intervention," BTPSM CEO Morten Nilsson, stated.

"During this time, our hedges have performed as expected, and whilst the value of the scheme’s assets has fallen over this period, there has been no worsening in our estimated funding position."

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