Balfour Beatty ups pension scheme funding contributions

The Balfour Beatty Group is expected to make scheme funding contributions to the Balfour Beatty Pension Fund (BBPF) of around £38m in 2022 and £18m in 2023, in line with the accelerated mechanism agreed with the trustees.

The group previously agreed to make total cash deficit contributions of £64m from 2021 to 2023 to support the scheme's aim to reach self-sufficiency by 2027.

However, this agreement also included a mechanism for accelerating the payment of these contributions set out above if the earnings cover for shareholder returns falls below 2x.

Therefore, as a result of Balfour Beatty's share buyback programme and following discussions with trustees, the group agreed to accelerate the contributions.

In additon to this, Balfour Beatty agreed to make additional deficit contributions of £2m per month from July 2022 until the next triennial funding valuation at 31 March 2022 is completed, or September 2023 at the latest.

As a result, the group will now make deficit contributions to the BBPF of £38m in 2022, having already made deficit contributions totalling £29m in H1 2022, with a further £18m expected in 2023.

Discussions for the next formal triennial funding valuation, due with effect from 31 March 2022, are also already underway between the group and scheme trustees.

The group also previously agreed to continue to make deficit contributions of £6m per annum to the Railways Pension Scheme (RPS) following the triennial funding valuation in December 2019, which should reduce the funding deficit to zero by 2025.

According to the group's half year accounts, the BBPF currently holds a £393m surplus, up from £263m in the first half of 2021, while the RPS recorded a surplus of £14 million, compared to a £52m deficit in H1 2021.

The improvements were attributed primarly to an increase in the yields on corporate bond, although an increase in discount rate also prompted net actuarial gains across the retirement benefit schemes of £103m, up from £46m for the first half of 2021.

The surplus in the BBPF and RPS, however, was partially offset by the £46m deficit recorded for other schemes.

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