The BT Pension Scheme has reduced its outstanding deficit by £1 billion, leaving a total shortfall of £2.7 billion. BT Group and the plan have finalized a set of steps to reach a fully funded status by 2030.
According to the most recent triennial valuation, the scheme’s funding level rose from 91 per cent to 92.3 per cent over the same period.
Per the new deal, BT is contributing an extra £282 million via a zero-coupon bond due in 2033. This addition works in tandem with existing contribution plans to tackle £2.1 billion of the current debt.
The firm announced that £30 million in scheduled direct payments to the scheme are being moved up to the 2026/27 fiscal year. Contributions planned for 2027/28 through 2030/31 will instead be swapped for zero-coupon bonds issued by BT, keeping the payment timeline identical.
In addition, BT will keep paying out £180 million each year under the 2021 asset-backed funding structure.
These actions should bring the remaining deficit down to roughly £300 million. BT anticipates covering this gap through investment returns by 2030.
Because of these changes, the corporation stated it anticipates no further deficit contributions are needed for the plan to be fully funded.
The deal also features a £4 billion security package involving a new charge over EE shares. This offers extra protection for the scheme if BT were to face insolvency.
This stronger security allows BT more flexibility, permitting shareholder distributions of up to £1.5 billion in 2026/27, increasing to £2 billion by 2029/30, without triggering additional payments to the scheme.
Furthermore, the arrangement establishes a more objective test to determine whether BT can receive a refund and sets out principles for addressing any funding deficit identified at future triennial valuations.
BT Group chief financial officer, Patricia Cobian, said: “This agreement supports our capacity to continue to invest in next-generation networks and transform BT. It reflects our disciplined approach to capital allocation, balancing long-term investment, our pension commitments, sustainable dividend growth, and a strong balance sheet.”
Meanwhile, BTPS trustee chair, Jill Mackenzie, welcomed the improvement in the scheme’s funding position despite challenging economic conditions. “We are pleased with the progress made since the last valuation despite high levels of macroeconomic volatility and uncertainty,” she said. “The deficit has reduced, security strengthened, and we remain on track to achieve full funding by 2030.”
