BT 2000 Annual Report Download - page 40

Annual report and Form 20-F 39
The group's annual pension charges for the 2000, 1999
and 1998 ¢nancial years of »167 million, »176 million and
»177 million, respectively, have been based on this
December 1996 valuation. These charges take into account
the amount of the pension provision which had been
established over recent years in the group's accounts and
which stood at »629 million at 31 March 2000.
Additionally, under UK accounting standards, the cost of
providing incremental pension bene¢ts for early leavers in
each of these three ¢nancial years has not been charged
against the pro¢t in the period in which people agree
to leave, since the latest actuarial valuation of the
pension fund, together with the pension provision,
indicated a surplus.
The group's ordinary contribution into the fund has
been at 9.5% of employees' pensionable pay during each of
the three ¢nancial years under review. In addition, the
company paid special contributions into the fund of
»230 million in March 2000 and »200 million in March
1999 in part because of redundancies.
The number of retired members and other current
bene¢ciaries in the pension fund has been increasing in
recent years and, at 31 December 1999, was approximately
45% higher than the number of active members.
Consequently, BT's future pension costs and contributions
will depend to a large extent on the investment returns of
the pension fund and could £uctuate in the medium term.
A further full actuarial valuation of the pension fund
is being carried out as at 31 December 1999. Preliminary
indications show that, using assumptions to be adopted for
calculating the company's pension cost in the 2001 and
following ¢nancial years under SSAP24, the assets of the
scheme at 31 December 1999 of over »29 billion broadly
match the actuarial liabilities of members' past service to
that date.
We expect the pension cost charged in the group's
accounts, which amounted to »167 million in the 2000
¢nancial year, to approximately double in the 2001
¢nancial year. This is, in part, because of the general trend
towards longer life expectancy. There will also be a smaller
amortisation in future of the combined pension fund
position and pension provision held in the BT group
balance sheet. The amortisation credit netted in pension
costs amounted to »163 million in the 2000 ¢nancial year.
We expect that the cash contributions payable to the fund
will rise in the 2001 ¢nancial year, from the 9.5% of pay
that we have paid in recent years, to around 11.5%.
Following a High Court judgement made in October
1999, the BTPS is liable to pay additional bene¢ts to
certain former employees of the group who left under
voluntary redundancy terms. These were former employees,
in managerial grades, who had joined the group's business
prior to 1 December 1971. The value of the additional
bene¢ts at 31 March 2000 is estimated at »300 million.
Impact of in¯ation
In accordance with a requirement of BT's main licence,
the group's annual accounts for the 1999 ¢nancial year
prepared on a current cost basis were published in
September 1999. These accounts showed that the group's
current cost pro¢t before tax was »4,463 million, compared
with »4,295 million under the historical cost convention.
The group's current cost total assets at 31 March 1999 were
»30,922 million, compared with »27,962 million in its
historical cost accounts. The current cost accounts
for the 2000 ¢nancial year are to be published by
30 September 2000.
Environment
When removing old analogue exchange equipment from
buildings, BT recycles the metal content and takes special
care to properly dispose of any hazardous materials.
Although BT receives proceeds from the sale of recovered
materials, this is more than o¡set by the cost of dealing
with hazardous materials, contracting and planning their
removal and preparing the released site for further
development. BT believes that the total cost of dealing
with these hazardous materials will not be signi¢cant.
Segmented information
BT essentially operates as a unitary business, providing an
integrated range of telecommunications products and
services. Accordingly, BT does not publish separately the
operating pro¢t for the various sources of turnover
described above. In the 2000 ¢nancial year, approximately
95% of the group's turnover was generated by operations
in the UK, compared with 96% in the 1999 and 1998
¢nancial years. Including BT's proportionate share of its
ventures, which are mainly located outside the UK, 82% of
total turnover was generated in the UK, compared with
90% in the 1999 ¢nancial year and 94% of total turnover
from continuing operations in the 1998 ¢nancial year.
BT is required under its main licence to publish
disaggregated ¢nancial information for various activities
of the group, which have been used as the basis of
charges paid by other telecommunication operators in
the UK for the use of BT's network. The activities
presented separately in the regulatory ¢nancial
statements do not necessarily correspond with any
businesses separately managed, funded or operated within