BT pension scheme deficit swells to £7bn

BT's pension deficit has swollen to �7 billion as it agreed a 16-year recovery plan
BT's pension deficit has swollen to �7 billion as it agreed a 16-year recovery plan
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BT’s pension deficit has almost doubled to £7bn, leading to the telecoms giant to commit to pay £2bn into the scheme over the next three years.

The company revealed it has agreed a 16-year recovery plan with the trustees of its defined benefit (DB) pension scheme, following its 2014 valuation.

BT will pay £1.5bn by the end of April 2015 from existing cash and investment balances.

The deficit for the scheme, which has 300,000 members - around 40,000 of them current employees - has grown from £3.9bn in 2011. BT said it reflected the low interest environment.

BT’s previous pension deficit announcement in 2011 saw £2.6bn paid off in the first three years, representing 67 per cent of the shortfall.

The latest plan to pay off £2 billion in the first three years represents 29 per cent of the deficit, with further instalments planned through to 2030.

Finance director Tony Chanmugam said: “We remain focused on our prudent financial policy of investing in our business, reducing net debt, supporting the pension fund and paying progressive dividends.”

Chief executive Gavin Patterson said the 16-year recovery plan reflected “the strength and sustainability of our future cash flow generation”.

Mr Patterson also revealed that its roll-out of superfast fibre broadband - which can also be used by other providers - now covered around three quarters of the UK.

The disclosure came as BT also unveiled plans to roll out “ultrafast” broadband delivering internet speeds six times faster than those currently available, starting from the 2016/17 period.

Its “G.fast” technology, which will be tested at pilot locations this summer, will help deliver a service of up to 500Mbps to most of the UK within a decade, BT said. Currently BT’s “superfast” fibre network delivers speeds of up to 80Mbps.

Pilots will take place this summer in Huntingdon, Cambridgeshire and Gosforth, Newcastle, with around 4,000 homes and business able to participate.

In a trading update, the group also said pre-tax profits for the third quarter to the end of December were £814m, up 13 per cent from the same period a year before and ahead of expectations.

BT said it added 119,000 broadband customers during the period. Its offering has been bolstered by the offer of free Premier League football, as it vies for business against rivals such as Sky and TalkTalk.

Analyst Paul Kavanagh questioned whether the pensions charge would impact on the telecoms giant’s sports ambitions, as the round of bidding for the next set of Premier League TV rights gets under way.

Meanwhile the group said it was making “good progress” in its plan to buy the EE mobile phone network for £12.5bn.