THE scale of Britain’s pensions crisis was thrown into sharp relief yesterday when two major employers, BT and the Royal Mail, revealed that they would pay hundreds of millions of pounds to plug deficits in their pension funds.

The Institute of Actuaries, meanwhile, issued a warning at the annual conference of the National Association of Pension Funds in Glasgow that there is a £250 billion shortfall between the benefits promised by company pension schemes and actual assets.

BT said its main pension fund was £2.1 billion in the red, a figure calculated by its actuaries. It promised to stand by the fund and will increase its annual top-up from £200 million to £232 million and extend payments from five years to 15 years.

The Royal Mail’s pension fund has slipped from a £272 million surplus last year to a hypothetical deficit of £4.6 billion under the FRS 17 accounting treatment. It also pledged to top up its fund “until the deficit is cleared” and will pay an additional £100 million a year on top of the £265 million it is already paying. Allan Leighton, chairman, said the extra payments were needed to maintain morale as the company enters the second year of a three-year restructuring programme in which 30,000 postal workers would be made redundant.The Royal Mail scheme has 400,000 members, of whom 170,000 are still working. It is the fifth largest pension scheme.

However, Royal Mail believes that a current actuarial valuation, due to be completed this autumn by Watson Wyatt, the actuaries, will reveal that the actual deficit is lower than the FRS17 figures suggest.

In the seven weeks since the snapshot valuation for FRS 17 purposes was taken, the deficit has improved by 18.5 per cent to £3.7 billion on the back of a recovery in the stock market.

However, the volatility of pension funds under current market conditions was underlined by BT, which said that its deficit would widen to £6.3 billion under FRS 17 treatment, which is considered conservative by the actuarial industry.

FRS 17 assumes that shares will grow at about 3.5 per cent — the current rate of return on AA grade corporate bonds — a year in real terms, compared with the 5.2 per cent used by BT’s actuaries.

Ian Livingston, finance director of BT, said: “The assumptions we have used are prudent, and it is well within our capability to finance.”

Ronnie Bowie, of the pensions board of the Institute of Actuaries, supported Mr Livingston’s stance and said “what is being projected is not unreasonable”.

However, uncertainties remain. The deficit will increase by £900 million if the return on the investments falls short by a quarter of one per cent. If scheme members live, on average, by a year extra, the deficit would grow by £700 million.

Figures prepared by William Mercer show UK pension schemes have promised benefits worth £970 billion, but now have assets of £720 billion. Mr Bowie said: “Britain can’t guarantee its pension benefits.”