BT boosts pension scheme

Telecoms group BT said today it would make a one-off payment of £500m (€746m) into its main pension scheme by the end of this month.

The boost to its defined benefit scheme, which was closed to new members in April 2001, comes after a more prudent accounting method calculated the deficit at the end of 2005 at £3.4bn (€5bn).

BT will accelerate payments to cover the shortfall, equivalent to £280m (€418m) a year for 10 years. It will make an advanced payment of £840m (€1.25bn) by April - including the £500m (€746m) this month – followed by payments of £280m (€418m) a year between 2009 and 2015.

In the wake of the last valuation three years ago, BT said it would pay at £232m (€346m) a year over 15 years. It pointed out that if the previous valuation approach had been in force, the scheme would currently be in surplus.

The scheme has 350,000 members in total, including 177,000 pensioners and 77,000 workers who are still contributing.

Today’s agreement with pension fund trustees includes the potential for higher contributions in the event that investment performance is not in line with expected returns. Employee contributions will remain the same, BT added.

Chairman Christopher Bland said: “This is a fair and prudent deal for pensioners and for shareholders, which re-confirms that BT stands fully behind its pension obligations. The scheme is well-managed and assets have grown very strongly in recent years.”

Tim Chessells, chairman of trustees at the BT Pension Scheme, said: “This agreement offers balance and certainty.

“It secures additional strong support to the benefit of pensioners, is consistent with the interests of scheme members and is further underpinned by having a financially strong sponsor.”