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BT pension fund takes a £11bn blow in the market chaos caused by the mini-Budget
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Losses: BT’s pension fund assets fell in value as the price of government bonds or government debt plummeted
BT’s pension fund took a £11bn blow in the market chaos that followed last month’s mini-budget.
The fund’s assets fell in value as the price of government bonds or government debt plummeted between September 23 and 28. At the end of June, BT’s final pay pension scheme (BTPS) stood at £47bn, suggesting that the market outage has since wiped out about a fifth of its value – to £36bn.
“Prior to the Bank of England’s intervention in the gold market, the value of the plan’s assets had fallen by an estimated £11 billion,” a BTPS spokesman said.
But the company was not required to provide additional funds to cover the depreciation of the plan’s assets.
Chief executive Morten Nilsson said: ‘While the value of the scheme’s assets has declined over this period, our estimated funding position has not deteriorated.’
BTPS, with nearly 270,000 members, was one of thousands of pension plans in the UK that used liability-driven investment strategies (LDI) to protect the plan’s finances from adverse interest rate fluctuations and inflation.
But when Kwasi Kwarteng announced unsecured tax cuts in its mini-budget last month, gold investors shuddered at how much the government would have to borrow.
Gold-plated prices slumped, plaguing LDI funds. As these funds borrowed to increase their holdings, the investment banks that lent them demanded more collateral, leaving many on the brink of collapse. The Bank of England intervened with a bailout, which ended last Friday.