BT pays £2bn to halve pension deficit and plans to plug gap by 2021

 

Click to follow

Shares in BT surged to a four-year high of 232.1p yesterday as it said it will make a £2bn payment to halve its pension fund black hole, paving the way for higher dividends.

The deal, agreed with the pension fund's trustee, sees BT make a one-off payment of £2bn this month and nine annual ones of £325m until 2021. That should eliminate the deficit from the country's largest pension fund.

BT said the deficit had fallen from its peak £9bn at the end of 2008 to £4.1bn at the end of June last year. The deal replaces one struck in 2008 that saw BT promise to pay £525m a year into the fund for 13 years with the payment linked to inflation. The new £325m payment is fixed.

The company has acted quickly to save itself £40m by taking advantage of the current 26 per cent corporation tax relief, which itcan claim this financial year, rather than the 24 per cent it falls to in April.

Ian Livingston, the chief executive, said: "This agreement, under which the company makes an immediate contribution to the scheme of almost half of the deficit, reflects BT's financial strength and reaffirms our commitment to the scheme."

Paul Spencer, the chairman of the trustees, said: "Since the last valuation, BT has had a successful period, enabling it to pay a £2bn upfront payment, and eliminate the deficit within 10 years."

The BT pension fund, which closed to new members in 2001, looks after 186,000 pensioners, 91,000 former employees who have moved to other jobs and 53,000 current staff.

Comments