BT is going to pay around £13.1bn over the next decade to plug the deficit of its defined benefit (DB) pension scheme.
According to the triennial funding valuation of the scheme, published today (10 May), the deficit of the BT Pension Scheme (BTPS) reached £11.3bn at 30 June 2017.
This is an increase of £4.3bn when compared to the previous valuation, mostly due to a fall in long-term interest rates, BT stated.
The deficit will be met over a 13-year period, with three different contributions made over the next decade.
First, the telecommunications company will comply with the previous recovery plan, and pay £2.1bn until March 2020.
Secondly, BT will make a further £2bn contribution, due to be funded from the proceeds of the issuance of bonds, which will be held by the pension scheme.
Finally, for the 10 years from 1 April 2020 to 31 March 2030, the company will make annual payments of around £900m.
This means that the recovery plan includes material contributions by BT to the scheme of £4.5bn by 30 June 2020, when the next valuation is expected to take place, the company said.
BT has also agreed to continue to provide the scheme with certain protections, in line with the terms agreed at the 2014 valuation, including shareholder distributions.
The company will provide additional payments to the pension scheme by the amount they exceed a threshold, set at dividend per share growth of 10 per cent a year and an additional £200m annually for share buybacks on a cumulative basis.
The company will provide additional payments to the pension scheme by the amount that shareholder distributions exceed a threshold, which has been set at dividend per share growth of 10 per cent a year, and an additional £200m per year for share buybacks on a cumulative basis.
The pension scheme will, in the meantime, be closed to future accrual.
The staff will be moved to a new hybrid pension arrangement over the coming year, which will combine elements of both defined benefit and defined contribution (DC) pension schemes.
This new plan will be available to members of the current defined benefit scheme, which will close for future service in June.
maria.espadinha@ft.com
