Openreach stake to plug BT pension hole – report

The deficit in the BT pension fund has been a long-standing headache but handing over a stake in broadband wholesale subsidiary might act as some relief.

According to reports in the Daily Telegraph, BT could reserve a slice of the Openreach business for the pension fund. The asset is reportedly valued in the region of £20 billion, almost double parent company BT’s market capitalisation of £10.6 billion. Share price in the telco has fallen to 105.75 (at the time of writing), 45% down across 2020.

With the pension fund currently £11.3 billion short of current liabilities, assets are worth £49.3 billion versus liabilities of £60.6 billion, the telco is still scraping for cash to bridge the divide. This is not the first time a plan to carve off a portion of Openreach as compensation has been discussed, but in 2017 BT elected for a £2 billion loan to reduce the deficit.

While this is a constant source of embarrassment for the firm, the problem will have to be shorted sooner rather than later. During the 2030s and 40s, it is forecast the fund will have to pay members more than £3 billion annually.

The issue at hand dates back to the 1990s, when BT took advantage of a Government scheme allowing for a holiday period on pension payments between 1989 and 1993. Many companies opted into the scheme, though BT managed the process much more poorly than most as the accrued liabilities added to the eye-watering number today.