BT pensions black hole 'now £5.5bn'

THE share market slump has left BT with a £5.5bn pension black hole which could force it to increase its annual £200m top-up charge, according to Goldman Sachs. Any hike in pension payments would depress profits. The shares, at 195 3/4p, off 1/4p, are already near historic lows.

BT is the latest major company to face mammoth pension shortfalls in relation to its market value. A report by UBS Warburg revealed that others, including Rolls-Royce, Royal & SunA lliance, ICI and GKN are also buckling under the weight of pension deficits.

The BT scheme, which covers 376,000 past and present workers, will be formally valued by an actuary at the end of the year. If the deficit has grown substantially, the trustees may force the telecoms company to increase payments.

The actuary estimated the deficit at £1.6bn at the end of last year. But since then markets have plummeted, deepening the hole by as much as £3.9bn, Goldman says. It doubts that the trustees will feel comfortable with such a large hole.

The size of deficit on BT's £27.1bn scheme means that any movements in the stock market will have a significant effect on the company's profits and share price.

Goldman estimates that a 1% fall in the market is sufficient to knock the shares by at least twice as much. BT dismissed the report as 'flawed'.

Concerns are also mounting over the pension scheme at troubled telecoms equipment maker Marconi. The fate of the group's 84,000 pension scheme members remains uncertain as talks with banks and bond holders reach a critical stage.

The fund has a £126m deficit and has recently halved its exposure to shares in an attempt to safeguard members' entitlements.