BT is to put more money into its pension fund during the coming years after the deficit increased to £3.4bn.
The deficit, which has to be calculated every three years, was arrived at using a more conservative actuarial methodology, BT said today. The method used when the deficit was last calculated in 2002 would have shown “a modest surplus” for the end of 2005, BT said.
BT will make an advance payment of £840m by April, representing three years’ instalments, and will then pay £280m a year between 2009 and 2015. This agreement with trustees of the fund replaces a previous pledge to contribute £232m annually for 15 years. BT also increased its forecast for the annual return of the scheme to 3.2pc, up from an earlier prediction of 2.5pc. The scheme has made an average return of 7.2pc over the last 20 years.
However, BT has agreed to pay in more if returns do not reach 3.2pc a year and may contribute less should returns exceed the forecast.
Sir Christopher Bland, chairman of BT, said: “This is a fair and prudent deal for pensioners and for shareholders which re-confirms that BT stands fully behind its pension obligations.”
Most of the deficit stems from the defined benefit scheme, which BT closed to new members in April 2001 and replaced by a defined contribution scheme.
BT said the existence of the Crown Guarantee – an insurance policy to protect the pensions of BT staff should the company go bust that was granted at privatisation in 1984 – has not been taken into account. A BT spokesman said no agreement has yet been reached with the Department for Trade and Industry about the extent of the Crown Guarantee, which BT argues covers 75pc of their scheme.