Citi flags pension risk to BT dividend hopes ahead of scheme review Proactive uses images sourced from Shutterstock
BT Group PLC’s (LSE:BT.A) pension scheme could swallow billions more than investors expect, according to Citi, which warns the outcome may further delay progress on the dividend.
The bank, which rates BT a sell with a £1.75 target price, hosted a teach-in on Tuesday with pensions expert John Ralfe.
BT’s triennial valuation priced at the end of June, with results expected late this year or in early 2027.
Ralfe believes the actuarial deficit is likely to come in at about £3.3 billion.
That would be roughly £0.8 billion higher than implied by the recovery plan set out at the 2023 valuation.
A triennial valuation is a three-yearly health check that schemes must undergo, setting the cash payments an employer makes to close any shortfall.
Ralfe also pointed to the Low Dependency Funding Basis, a new requirement from The Pensions Regulator designed to move schemes towards a position where they no longer rely on the sponsoring company.
Meeting it could demand a further £2.5 billion over the next decade, on top of the existing deficit recovery schedule.
Citi said that money would compete directly with shareholder returns.
The dividend was the main source of disappointment at BT’s full-year results in May.