BT Group announces triennial pension valuation
Summary by AI BETAClose X
5 November 2026
BT Group announces triennial pension valuation
BT Group (“BT”) and the BT Pension Scheme (“BTPS”) have agreed the 30 June 2026 triennial funding valuation (“2026 valuation"):
- The Scheme’s funding position has continued to improve, with the deficit reducing from £3.7bn at June 2023 to £2.7bn at June 2026, and the funding level increasing from 91.0% to 92.3%.
- Payments agreed at the 2023 valuation will address £2.1bn of the deficit and will be substantially replaced by zero-coupon bonds shortly after this announcement. Payments scheduled directly to the BTPS totalling £30m will be brought forward and paid in FY27; the remaining FY28-FY31 scheduled contributions will be replaced with zero-coupon bonds with the same payment profile, issued by BT. BT will continue to make annual payments of £180m under the asset-backed funding arrangement established in 2021.
- BT will need to provide £282m of additional funding to ensure the BTPS remains on track to reach full funding by 2030. The additional BT funding of £282m will be provided shortly through a zero-coupon bond maturing in 2033.
- The above measures will substantially reduce the funding deficit, to around £0.3bn, which will be addressed by expected future investment returns to 2030. No further deficit contributions are expected to be required for BTPS to reach full funding.
-
The wider package of measures both improves the security of the Scheme and provides BT with greater corporate flexibility, reflecting the BTPS’s improved funding position, BT’s improved covenant, and additional security agreed as part of the valuation. The wider package:
- provides £4bn of security, through a new charge over EE shares, giving the BTPS extra protection in the unlikely event of BT becoming insolvent;
- allows shareholder distributions of up to £1.5bn in FY27, increasing to £2.0bn by FY30, without triggering additional payments to BTPS;
- moves to a more objective test to determine if a refund is paid to BT; and
- establishes principles for addressing a deficit if one exists at a future triennial valuation.
Patricia Cobian, BT Group Chief Financial Officer, said: “This agreement supports our capacity to continue to invest in next-generation networks and transform BT. It reflects our disciplined approach to capital allocation, balancing long-term investment, our pension commitments, sustainable dividend growth and a strong balance sheet.”
Jill Mackenzie, Trustee Chair of the BTPS, said: “We are pleased with the progress made since the last valuation despite high levels of macroeconomic volatility and uncertainty. The deficit has reduced, security strengthened and we remain on track to achieve full funding by 2030.”
Further information
1. Funding position at 30 June 2026
1.1 The funding deficit at 30 June 2026 is £2.7bn and is detailed in the table below.
|
|
June 2023 |
June 2026 |
|
Assets (£bn) |
37.2 |
32.1 |
|
Liabilities (£bn) |
(40.9) |
(34.8) |
|
Deficit (£bn) |
(3.7) |
(2.7) |
|
Funding level |
91.0% |
92.3% |
1.2 The discount rate at 30 June 2026 has been derived from prudent investment return expectations with regard to the yield on gilts, swaps and corporate bonds, reflecting the current investment strategy and how it will evolve over time. The discount rate for the 2026 valuation is equivalent to 1.0% per year above the gilt yield curve averaged over the lifetime of the scheme.
1.3 The principal financial assumptions and average life expectancies for members at age 60 are summarised in the table below.
|
|
June 2023 |
June 2026 |
|
Average discount rate |
5.3% |
6.1% |
|
Average RPI inflation |
3.6% |
3.3% |
|
Average CPI inflation |
3.2% |
2.8% |
|
Male in lower pension bracket(s)1 |
25.5 |
25.9 |
|
Male in higher pension bracket(s)1 |
27.2 |
27.8 |
|
Female |
28.0 |
28.7 |
|
Average additional life expectancy for a 60 year old in 10 years’ time |
0.8 |
0.9 |
1 For the 2026 valuation, male pensioners were grouped into 4 categories by amount. The ‘lower’ pension bracket here represents a straight average of the two lowest brackets and the ‘higher’ represents a straight average of the highest two brackets.
2. Long-term plan
2.1 Since the 2023 valuation, the BTPS has continued to reduce its allocation to growth assets in line with the agreed long-term strategy. As at 30 June 2026, the BTPS held 74% of its assets in bond-like assets which aim to match benefit cashflows, and 26% in growth assets.
2.2 The bond-like assets include £0.9bn for BTPS’s interest in the Asset Backed Funding (“ABF”) arrangement established by BT in 2021, secured on EE Limited. This reflects the potential for ABF payments to stop sooner and therefore does not recognise the full value of the remaining annual payments of £180m scheduled until June 2033, which had a present value of £1.0bn at 30 June 2026.
2.3 The 2026 valuation maintains the long-term plan established in 2017, under which BTPS will gradually move towards a low-risk investment strategy, reducing the risk of the funding position falling behind plan. By 2034, the portfolio is intended to consist predominantly of bond and bond-like investments.
3. Funding the deficit
3.1 In 2017, BT and the BTPS established an objective to reach full funding by 2030. Each subsequent annual funding update indicated that the BTPS remained broadly on track to achieve this, while navigating regulatory headwinds and macroeconomic volatility.
3.2 At 30 June 2026, the BTPS had a funding deficit of £2,677m. This was behind plan primarily due to longevity and other demographic headwinds over the previous three years, partly mitigated by the scheme’s longevity hedges.
3.3 Payments under the 2023 plan will be reshaped. Payments totalling £30m will be brought forward and paid in FY27 to BTPS. Remaining FY28-FY31 scheduled contributions will be replaced with four zero-coupon bonds with the same payment profile, issued by BT Finance plc under its Euro Medium-Term Note Programme. BT will continue to make annual payments of £180m under the asset-backed funding arrangement established in 2021.
3.4 BT will provide £282m of additional funding, met through an extra zero-coupon bond maturing in 2033 with a par value of £420m.
3.5 The five zero-coupon bonds will be issued by BT Finance plc under its Euro Medium Term Note Programme shortly after this agreement, and in any case before the end of the financial year. The bonds will be issued to the BT-BTPS co-investment vehicle and will have the following maturity dates and par values:
- April 2027: £590m
- April 2028: £590m
- April 2029: £590m
- April 2030: £490m
- September 2033: £420m
3.6 This will substantially reduce the funding deficit, to around £0.3bn. No further deficit contributions are expected to be required for BTPS to reach full funding, as the remaining deficit is due to be met by investment returns above the prudent discount rate.
3.7 There is a £62m reduction (in present value terms) to on-going administration expense contributions, which will now end on 30 June 2032, two years earlier than under the 2023 agreement.
3.8 Payments from 1 July 2026 to fund the funding deficit at 30 June 2026 and on-going admin expenses, are shown in the table below.
|
£m |
June 2023 agreement |
June 2026 agreement | |||||||
|
Year to 31 March |
ABF payments |
Deficit payments from BT |
Subtotal |
Admin expense payments from BT |
ABF payments |
Deficit payments to BTPS |
Bond maturities (in Falcon 2) |
Subtotal |
Admin expense payments from BT |
|
2027 |
- |
- |
- |
20 |
- |
30 |
- |
30 |
17 |
|
2028 |
180 |
600 |
780 |
27 |
180 |
- |
590 |
770 |
21 |
|
2029 |
180 |
600 |
780 |
27 |
180 |
- |
590 |
770 |
21 |
|
2030 |
180 |
600 |
780 |
27 |
180 |
- |
590 |
770 |
21 |
|
2031 |
180 |
490 |
670 |
27 |
180 |
- |
490 |
670 |
24 |
|
2032 |
180 |
- |
180 |
27 |
180 |
- |
- |
180 |
24 |
|
2033 |
180 |
- |
180 |
27 |
180 |
- |
- |
180 |
6 |
|
2034 |
180 |
- |
180 |
27 |
180 |
- |
420 |
600 |
- |
|
2035 |
- |
- |
- |
7 |
- |
- |
- |
- |
- |
|
TOTAL CASH |
1,260 |
2,290 |
3,550 |
216 |
1,260 |
30 |
2,680 |
3,970 |
134 |
|
NPV1 |
990 |
2,045 |
3,035 |
174 |
990 |
30 |
2,297 |
3,317 |
112 |
1 NPV as at 30 June 2026, calculated using the discount rate adopted for the 2026 funding valuation
3.9 To provide greater transparency and certainty, BT and BTPS have agreed principles for addressing a deficit in the event one exists at a future valuation. For a deficit of up to £2bn, BT and BTPS expect the recovery plan to comprise an initial payment of £300m shortly after agreeing the 2029 valuation, followed by annual payments of £600m until the deficit is cleared. These principles apply until 2040.
4. Co-investment vehicle
4.1 In 2021, BT and BTPS established a co-investment vehicle that allows contributions to be returned to BT if they are not required by the BTPS. This provides BT with protection against overfunding and greater confidence to provide funding upfront.
4.2 Refund assessments will move to a more objective test carried out between June 2032 and June 2040 based on BTPS’s funding position and subject to BT maintaining adequate financial strength.
4.3 In particular, the new 2033 bond issued to the co-investment vehicle will be returned to BT before maturity if it is not required by the BTPS at the June 2032 valuation.
5. Security on insolvency
5.1 BT has agreed to provide BTPS with an extra £4bn of security over EE Limited’s shares until 2040. This provides the BTPS with protection in the highly unlikely event of BT becoming insolvent, enabling an objective process to refund contributions from 2032. The payment on insolvency would be the lower of £4bn and the BTPS solvency deficit.
5.2 The provision of security is not expected to negatively affect BT’s credit rating.
6. Protections
BT will continue to provide the BTPS with certain protections to 2035.
6.1. Shareholder distributions
6.1.1 BT will provide additional payments to the BTPS by the amount that shareholder distributions exceed a threshold.
6.1.2 The threshold allows for shareholder distributions of £1.5bn in FY27, with 10% annual dividend per share growth for FY28 and FY29. This is up from £1.0bn for FY26 under the 2023 agreement.
6.1.3 Any additional payment triggered to BTPS will be capped at the level of the BTPS deficit at that time measured on a low dependency funding basis, currently around £0.3bn higher than the funding deficit.
6.1.4 BT has agreed to implement a similar protection at each subsequent valuation, with the terms to be negotiated at the time.
6.1.5 BT will consult with the Trustee if: it considers share buybacks for any purpose other than relating to employee share awards; it considers making any shareholder distributions in any of the next three years if annual normalised free cash flow of the group is below £1bn in the year and distributions within the year would be in excess of 120% of the above threshold; or it considers making a special dividend.
6.2. Material corporate events
6.2.1 The 2026 agreement removes payments being triggered from disposal of non-core business assets.
6.2.2 For network infrastructure related asset disposals of more than £2bn in total net cash proceeds over the next three years, BT will make additional contributions to the BTPS or the co-investment vehicle. The amount payable is the lower of BTPS’s deficit measured on a low dependency funding basis and one third of those net cash proceeds, although further payments may be required under legislation.
6.2.3 BT will continue to consult with the Trustee and use best endeavours to agree appropriate measures (which may include further payments) to protect BTPS where future corporate or third-party events could materially weaken BT’s ability to support the scheme financially.
6.3. Negative pledge
6.3.1 The agreement maintains the negative pledge from BT, that future creditors will not be granted superior security to the BTPS in excess of £0.7bn, covering any member of the BT Group.
6.3.2 Business as usual financing arrangements are not included within the £0.7bn.
About BT Group
BT Group is the UK’s leading provider of fixed and mobile telecommunications and related secure digital products, solutions and services.
BT Group consists of three customer-facing units: Consumer serves individuals and families in the UK; Business covers companies and public services in the UK; and Openreach is an independently governed, wholly owned subsidiary wholesaling fixed access infrastructure services to its customers – over 700 communications providers across the UK. BT has announced that International, which serves multinational organisations headquartered outside the UK and overseas public sector customers, will be contributed into a new joint venture, expected to complete in the second half of 2027.
British Telecommunications Limited is a wholly owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group. BT Group plc is listed on the London Stock Exchange.
For more information, visit www.bt.com/about
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