BT is to tackle its £9bn pension fund deficit with a 17 year recovery plan.

The telecoms giant, which claims its altered business model has allowed it to invest in the business, pay dividends and tackle its pensions hole, has announced that a triennial actuarial funding valuation and recovery plan is now in place with the BT Pension Scheme (BTPS) Trustee. The strategy will be submitted to the Pensions Regulator (TPR) for formal review.

BT will make payments of £525million per annum for the first three years; the first payment was actually made in December 2009. This will increase to £583million in the fourth year, and then by three per cent every year after.

Joint employer/employee contributions will be reduced to 13.6 per cent, but this move may be cushioned by figures showing that the value of the scheme's assets have increased by around ten per cent, from £31bn in December 2008, to £34bn. The BT defined benefit (DB) pension scheme was closed to new members on 1 April 2001.

The firm will also make additional matching contributions to the scheme in the event that cumulative shareholder distributions exceed cumulative total pension contributions over the three-year period to 31 December 2011. If net cash proceeds greater than £1bn are generated from disposals and acquisitions in any 12 month period, BT will make additional contributions to the scheme equal to a third of those proceeds.

Ian Livingston, chief executive at BT, said: "I am pleased that we now have an agreement in place with the Trustee. This is a prudent valuation and a recovery plan which re-affirms BT's commitment to meeting its pension obligations. The scheme is well-managed and asset values have grown strongly since the valuation date. We will continue to work with the Pensions Regulator during their detailed formal review."

Chairman of BTPS Trustee, Rod Kent, added: "The Trustee is pleased we completed this agreement before the 31 March 2010 statutory deadline. This agreement secures significant additional support to the benefit of scheme members, underpinned by a strong sponsor. The valuation was performed at a time of particularly difficult conditions in the global financial markets. In arriving at this agreement the Trustee has spent exhaustive effort over the last 18 months in detailed analysis supported by leading independent expert advisers."

BT has been advised in the process by Towers Watson, Penfida Partners, and Lovells.

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