BT is to pay £1.5 billion into its defined benefit (DB) pension scheme by April to tackle its £7 billion deficit.
The telecommunications firm will also increase the contribution rate for future benefits of active members from 13.5% to 16% from 1 April 2015 through to June 2017.
The figures were announced in its 2014 triennial funding valuation, which is part of an agreed 16-year recovery plan.
BT will pay the £1.5 billion lump sum out of existing cash and current investment balances. It will be split over two months, with around £800 million to £900 million to be paid in March, receiving 21% tax relief, and the remainder to be paid in April with 20% tax relief.
Over the next three years, BT will to pay a total of £2 billion into the scheme,
This year’s payments will be followed by a further £250 million in each of the years to March 2016 and March 2017.
This is £700 million less than it has paid over the previous three years despite its DB scheme deficit rising from £4.1 billion at the end of June 2011 to £7 billion as at 30 June 2014.
For the seven years from 2018 to 2024, BT will continue to make payments in line with the 2011 agreement.
This will then be followed by five annual payments by BT of £495 million through to 2029 and a final payment of £289 million in 2030.
Tony Chanmugam, group finance director at BT, said: “I am pleased that we have agreed the 2014 triennial funding valuation and recovery plan with the trustee.
“This agreement is a good outcome for the scheme’s 300,000 members and BT.
“The increase in the deficit from the 2011 valuation reflects the low interest rate environment. We have agreed a 16-year recovery plan reflecting the strength and sustainability of our future cash flow generation.
“We remain focused on our prudent financial policy of investing in our business, reducing net debt, supporting the pension fund and paying progressive dividends.”
Paul Spencer, chairman of the BT Pension Scheme trustee, said: “The trustee is pleased to have reached agreement with BT on the valuation of the scheme as at 30 June 2014.
“The valuation reflects the economic and market conditions at the valuation date and the improved financial position of BT.
“The agreement with BT secures an updated funding plan for the scheme supported by a range of enhanced protections.”
