BT’s stock was on the up this morning over news that it intends to halve the £4.1 billion deficit in its pension fund before the end of this month.
The telecoms giant claimed it would then make nine annual payments of £325 million each over the next decade in an attempt to wipe out the deficit.
The £2 billion used to halve the deficit this month has been raised using £1.5 billion of existing cash resources, supplemented by recent borrowings.
The pension deficit had become a significant drag on BT in recent years, negatively affecting its dividend payouts.
Investors have reacted positively to the announcement, with shares in BT currently leading the FTSE 100 higher, up 6.08 per cent at 233.6p at 9.15am.
The deficit in the pension fund, the largest private sector scheme in the UK, had already been significantly reduced from the figure of £9 billion established when BT last evaluated the scheme in September 2008.
This new plan replaces the previous scheme, which stretched over 17 years and had annual payments starting out at £525 million and then rising.
Chief executive Ian Livingston commented, ‘This agreement under which the company makes an immediate contribution to the scheme of almost half of the deficit reflects BT's financial strength and re-affirms our commitment to the scheme.
‘BT's long-term sustainable cash generation has improved significantly since the 2008 valuation and we remain focused on improving BT's financial strength, investing in our future and enhancing shareholder returns.’