BT to pay-off pension deficit within 10 years
Telecoms titan BT is to make a lump sum payment worth nearly half the amount of its pension deficit before the end of the month, followed by further smaller amounts that will see the shortfall eliminated within 10 years.
Telecoms titan BT is to make a lump sum payment worth nearly half the amount of its pension deficit before the end of the month, followed by further smaller amounts that will see the shortfall eliminated within 10 years.
The company announced on Friday morning that it had reached agreement with the trustee of the BT pension scheme that the funding deficit was £4.1bn at June 30th 2011, well down from the £9bn valuation recorded at December 31st 2008.
Under the recovery plan, BT will make a payment of £2bn into the scheme in the coming week from its existing cash resources (of £1.5bn) and recent borrowings, followed by nine separate payments of £325m in March of every year to 2021.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"I am pleased that we have been able to reach an agreement with the trustee. 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 re-affirms our commitment to the scheme," said BT's Chief Executive Ian Livingston.
"BT's long-term sustainable cash generation has improved significantly since the 2008 valuation and we remain focussed on improving BT's financial strength, investing in our future and enhancing shareholder returns," he said.
BT is to make the payment before the end of the month so it can be recorded as part of the current financial year (ending March 31st). Given the current dislocation in the gilts market ("as a result of quantitative easing and issues in the Eurozone"), the company says that undertaking the valuation at June 30th 2011 has reduced the uncertainty arising from trying to asses long-term pension liabilities.
BC
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
Starling Bank to scrap 3.25% interest rate from popular current account within days
Starling is to remove the generous 3.25% it pays on current accounts from next week – what does this mean for customers and should you move?
By Katie Williams Published
-
Top 20 UK areas where house prices have ballooned in last 25 years
Some parts of the UK have seen house prices grow by 652% since the turn of the millennium
By Daniel Hilton Published