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Pensions

BT bulks up pension with £13.1bn cash boost

BT bulks up pension with £13.1bn cash boost

Mona Dohle
Friday 11th May 2018

British Telecom' s (BT) triennial funding valuation revealed a £11.3bn funding deficit for its pension fund, which the firm intends to cover within the next 13 years.

Over the past three years, the BT pension fund deficit has increased from £7bn to £11.3bn, according to the schemes trustees, the fall in long term interest rates was a key reason for the rising deficit.

BT announced a three step plan to fund the deficit, starting from initial payments of £2.1bn over the next two years, of which £850m was paid by March this year.

The firm also aims to raise and additional £2bn from the proceeds of a bond issuance, with maturities ranging from 2033 to 2042.

For the 10 years from 1 April 2020 to 31 March 2030, BT will make annual payments of around £900m by 31 March each year, bringing the total cash injection to £13.1bn.

Paul Spencer, chairman of the BT Pension Scheme Trustee comments on the agreement: “The valuation reflects the economic and market conditions at the valuation date and secures an updated and improved funding plan for the Scheme supported by a range of protections. The substantial contributions agreed with BT in the near term, together with ongoing developments in the Scheme’s investment strategy, are expected to lead to a material improvement in the stability of the Scheme’s funding position.”

In addition to injecting additional cash into its pension scheme, BT also announced that it will take steps aimed at lowering the investment risk of its portfolio. About 15% of its growth assets such as equities and property have already been converted into -risk investments, such as bonds, the group confirmed.

As of June 2017, BT managed £49,344bn in assets on behalf of 297,454 members, it is the largest single-employer pension scheme in the UK.

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