BT Group this month will contribute £2 billion ($3.17 billion) to the BT Pension Scheme, London, according to a company announcement.
BT and the BT pension trustees agreed on a 10-year recovery plan for the pension fund. “Very critically is that almost half of the (current) £4.1 billion deficit will be paid off this month,” BT CEO Ian Livingston said in a conference call Friday to analysts and investors. “This will now be followed on the 30th of March every year with a payment of £325 million. That will last for nine years. So it's £2 billion up front and nine years of £325 million” every year.
The £36.7 billion BTPS had a deficit of £4.1 billion as of June 2011, which is down from a £9 billion deficit as of December 2008.
The initial £2 billion will be funded with about £1.5 billion existing cash supplemented by additional borrowing, according to a news release about the announcement. In addition, if the deficit is more than £1.9 billion in June 2014, extra payments on top of the agreed £325 million will be made. If the deficit exceeds £1.2 billion in June 2017, additional contributions will be made, according to the news release.
“Our recovery plan, unlike the last recovery plan we did, has no assumption about investment outperformance, which is another area of prudence,” Mr. Livingston said in the conference call.
Information on how the additional contribution may be invested was not available at press time. Efforts to reach Paul Spencer, chairman of the trustee for BTPS, were unsuccessful.
