BT plugs higher pension deficit with €4.2bn
The move follows the latest triennial valuation of the fund and criticism of the methodology used to calculate the deficit.
The telecoms group said it has adopted a "new and more conservative actuarial methodology" for the £36bn closed defined benefit fund - meaning the deficit has risen from the £2.8bn deficit under IAS19 that was disclosed as of September 2006.
In response, it has reached agreement with the trustees whereby "BT will make deficit payments equivalent to £280m per annum for 10 years with the first three years instalments paid up front". Some £500m would be paid in December 2006.
Company contributions would be dependent on investment performance, meaning the trustees would have insurance should investment performance not be in line with expected returns".
The plan gives the gives the company a benefit where BTPS' investment returns exceed 3.2% real.
Employee contributions will remain at 6% but joint employer/employee contribution will increase from 18.2% to 19.5% from January 1 2007.
Trustee chairman Sir Tim Chessells said: "This agreement offers balance and certainty. It secures additional strong support to the benefit of pensioners, is consistent with the interests of scheme members and is further underpinned by having a financially strong sponsor."
The company said the scheme assets represented 91% of liabilities at December 31 2005.
It also said that the existence of the so-called ‘Crown Guarantee' for pensions that was given to it when it was privatised was not been taken into account in determining the valuation results.