BT Group PLC, the sponsoring employer of the BT Pension Scheme, London, will contribute £2 billion ($3 billion) over the next three years in an effort to plug the U.K. pension fund's growing deficit.
The latest triennial funding valuation of the pension fund showed it had £40.2 billion in assets as of June 30, an increase of 8.9% compared with the same date in 2011 when the previous triennial valuation was done.
Liabilities, however, increased by 15.7% to £47.2 billion in the same time period. The deficit consequently increased 79.5% to £7 billion. The funding level decreased to 85.2%, compared with 90.4% as of June 30, 2011.
“The low-interest-rate environment at the valuation date has resulted in a higher value being placed on the scheme's liabilities, which has more than offset the improvements in the scheme's assets,” said a statement accompanying the valuation report.
BT and the trustee of the BTPS have agreed on and published a 16-year recovery plan, showing the cash contributions that the pension fund will receive.
BT said in the statement that it will contribute £1.5 billion by the end of April 2015 to the pension fund. It will then contribute £250 million in March 2016 and £250 million in March 2017. From 2018 through 2024, BT plans to make contributions of between £688 million and £724 million per year. These plans remain unchanged from the funding assumptions from the previous triennial funding valuation of 2011.
BT plans to contribute a further £495 million from 2025 through 2029, and then make a final contribution of £289 million in 2030, it said in the statement.
The funding of the pension plan will be reviewed at the 2017 valuation, and any changes in the deficit will be reflected in a new recovery plan.
“The valuation reflects the economic and market conditions at the valuation date and the improved financial position of BT,” said Paul Spencer, chairman of the BTPS trustee, in the statement. “The agreement with BT secures an updated funding plan for the schemes supported by a range of enhanced protections.”