BT Group PLC has agreed to a 13-year recovery plan with the trustee of the BT Pension Scheme, London, to plug an £11.3 billion ($14.7 billion) deficit as of June 30.
Figures from the latest valuation of the fund as of June 30, 2017, show a 61.4% increase in the deficit vs. the previous valuation as of June 30, 2014.
Over the period, assets grew 22.1% to £49.1 billion, while the investment return was 10.5% per year, said a news release Thursday. However, a 30% increase in liabilities over the period more than offset the growth in assets. The funded level of the pension fund fell to 81% as at June 30, 2017, vs. 85% three years earlier.
The 13-year recovery plan will see BT contribute £4.5 billion to the pension fund by June 30, 2020 — when the next valuation is set to take place.
The contributions will have three components. Over the three years to March 31, 2020, BT will contribute a total £2.1 billion to the fund, equal to the amount agreed under the previous recovery plan. BT said £850 million of this total was paid in March 2018, with the remaining £1.25 billion to be paid by June 30, 2019. It will make a further £2 billion contribution to the pension fund using proceeds of bond issuances.
Following those payments BT will make annual contributions of about £900 million for the decade starting April 1, 2020, through March 31, 2030.
BT said an important part of the agreement relates to lowering the level of investment risk in the fund and continuing to derisk in the future. The release said 15% of assets had moved to lower-risk investments such as bonds from growth assets including equities and real estate. Information on when the asset shift occurred was not provided.
"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," Paul Spencer, chairman of the BTPS trustee, said in the release.
BT announced earlier this year it will freeze two of the three sections of the BTPS, representing more than 99% of active participants, on June 30.
