Balfour raises contributions to plug pension gap

Balfour Beatty has agreed a deal to plug a £375m hole in its pension fund.

The housebuilder has reached an eight-year funding agreement with trustees of the pension scheme under which it will pay a one-off £40m sum and double its annual deficit contributions to £48m.

Balfour has more than 40,000 members in its defined benefit pension scheme, which closed to new members in 2007.

The group had agreed in 2008 to make payments into the scheme of £24m a year, but the funding gap has grown in recent years – from around £114m at the time of the most recent review, in 2007. Balfour said it had increased the annual contributions to £36m in April in anticipation of a greater funding need after the latest scheme valuation.

The new agreement will also see inflation-linked increases in its contributions every April.

Mark Howson, an analyst at Royal Bank of Scotland, said the contributions were unlikely to affect profit forecasts for Balfour, given that it had already increased annual payments to £36m. Shares in Balfour Beatty rose 6.4p to 279.4p.