Telecoms giant BT has revealed an expected £1.5 billion black hole in its pension fund for 2002 as it reported a fall in third quarter pre-tax profits.

Falling stock markets have slashed the value of pension fund investments, hitting many major companies which have already revealed gaping holes in their pension funds.

On Wednesday, Glaxo-SmithKline reported a £1.3 billion deficit in its fund.

BT said its actuary had examined the valuation based on an accounting rule, which will be applied from April 1.

The rules require a snapshot picture of the pension position which some companies complain makes their financial position look worse than it is.

For BT it reveals a deficit position which has become ten times worse in just three years.

While the pension funding valuation will not be announced until May, BT said the deficit would be in the range of £1 billion to £1.5 billion, compared with the £200 million deficit at March 31, 2000, following the previous valuation.

Since 1999 the company has been pumping £200 million a year into its fund by way of a top-up. It has not said whether it will need a further cash injection.

Despite the deficit, BT's 346,000 fund members, along with employees and shareholders, were given some reassurance.

A spokesman for the National Association of Pension Funds said: "Like other pension schemes, BT has suffered the consequences of the falling stock market but this doesn't mean that BT pensioners will lose out.

"BT is putting in money to make good any deficit. In practical terms the only way pensioners would lose out is if all BT's staff retired now."

Concerns about BT's pension fund have depressed the share price recently and following yesterday's statement the shares lost a further 9p, or five per cent, to 174p.

The former state-run monopoly blamed tough trading conditions for its third quarter pre-tax profits in 2002 falling by a third to £567 million.

But the company added the previous year's profit had been boosted by one-off gains.

Underlying pre-tax profit for the quarter to December rose 37 per cent to £521 million, at the upper end of market expectations.

Turnover rose one per cent to £4.7 billion