BT Group announces triennial pension valuation

BT Group and the BT Pension Scheme (“BTPS”) have agreed the 30 June 2023 triennial funding valuation (“2023 valuation") and how the deficit will be addressed (the “recovery plan”):

  1. The funding deficit at 30 June 2023 is £3.70bn, down from £7.98bn at the 2020 funding valuation following £4.36bn of deficit contributions
  2.  Annual contribution amounts remain unchanged, at £600m in each financial year until 31 March 2030, and a final payment of £490m before 30 April 2030. In addition, BT Group will continue to make payments of £180m each year under the asset-backed funding arrangement agreed at the 2020 valuation

The BTPS will continue to de-risk its investment strategy through to 2034, providing more certainty over outcomes, and is on track to be fully funded by 2030.

BT Group has agreed to continue to provide the BTPS with legal protections to 2035 as part of a long-term funding framework. The changes made to contractual protections for the BTPS at this valuation are consistent with our statutory obligations under the Pension Schemes Act 2021. The amendments agreed to the BTPS’s existing stabiliser mechanism provide greater certainty that BTPS will achieve full funding and increase the likelihood of a future refund to BT Group.

Simon Lowth, BT Group Chief Financial Officer, said: I am pleased that the BTPS continues to deliver in line with the long-term plan, despite the uncertainty and headwinds observed since 2020. Building on the framework agreed at the 2020 valuation allowed for a swift conclusion of the 2023 valuation.

“The agreement allows us to deliver on our strategic initiatives such as investing in our networks and transforming our business. And it is consistent with our funding priorities of investing in value enhancing opportunities, supporting our pension funds, paying progressive dividends and maintaining a strong balance sheet.

Otto Thoresen, BTPS Chairman, said: “The BTPS continues to be on track to fulfil its commitments to members, despite high levels of macroeconomic volatility and uncertainty.

“Our deficit is reducing, funding levels have improved and we remain on course to be fully funded by 2030.”

Further information

1. Funding position

1.1 Deficit at 30 June 2023

1.1.1 The funding deficit at 30 June 2023 is £3.70bn.

1.1.2 A summary of the funding position and principal assumptions is shown in the table below.


June 2020

June 2023

Assets (£bn)



Liabilities (£bn)



Deficit (£bn)



Funding level




Real discount rate



Average RPI inflation



Average CPI inflation



1 Assumed to be 1% below RPI until 28 February 2030 and in line with RPI thereafter.

1.1.3 Average life expectancies, for members 60 years of age, are as follows.


June 2020

June 2023

Male in lower pension bracket



Male in higher pension bracket






Average additional life expectancy for a 60 year old in 10 years’ time



1.1.4 As noted at the 2020 valuation, we expected headwinds to the BTPS deficit from two Government announcements which took place after 30 June 2020: The reform of the Retail Prices Index reduced the value of the Scheme’s assets by more than it reduced the value of its liabilities; and Government’s intention to pay higher pension increases to members of public sector pension schemes which automatically flow through to the BTPS increased the Scheme liabilities.

1.1.5 The reduction in the BTPS deficit since 30 June 2020 reflects £4.36bn of deficit contributions made over the period. ~£1.2bn of headwinds from the above regulatory changes were mitigated through asset returns and a fall in life expectancy.

1.1.6 Hedging and risk-reduction implemented by the BTPS in recent years has effectively protected the BTPS against certain risks: the increase in real interest rates over the period has had limited impact on the funding deficit, despite the significant reduction in the size of both the assets and the liabilities.

2. Investment strategy and return expectations

2.1 The 2023 valuation maintains the gradual de-risking approach used for the 2017 and 2020 valuations, which assumed the BTPS would reach a low risk investment strategy by 2034, consisting predominantly of bond and bond-like investments. As at 30 June 2023, the BTPS held 71% of its assets in cash flow matched assets and 29% in growth assets.

2.2 The discount rate at 30 June 2023 has been set consistently with the 2017 and 2020 valuations. It is derived from prudent investment return expectations above a risk-free yield curve based on gilt and swap rates, reflecting the investment strategy over time. It is equivalent to using a flat discount rate of 1.0% per year above the risk-free yield curve, or 5.3% per year.

3. Funding

3.1 The £3.70bn funding deficit is on track to be eliminated by June 2030 through annual contributions from BT Group and payments from an Asset Backed Funding (“ABF”) arrangement.

3.2 An ABF arrangement, which was set up in 2021 as part of the last valuation agreement, pays £180m into the BTPS every year until June 2034. The stream of payments is financed through dividends from EE Limited, and shares in EE Limited provide security over the payment stream.

3.3 If the BTPS reaches full funding as calculated by the Scheme Actuary at any 30 June, subsequent payments to the BTPS from the ABF will cease.

3.4 The present value of the full payment stream was £1.2bn at 30 June 2023. The market value was £1.1bn at 30 June 2023 and was included in calculating the funding deficit. The £0.1bn difference reflects the possibility that the full payment stream will not be required.

3.5 BT Group received tax relief at inception of the ABF based on the original market value of £1.7bn, and will receive further tax relief if payments are made to the BTPS in excess of this amount.

3.6 Payments from 1 July 2023 to address the £3.70bn funding deficit are shown in the table below.

Year to 31


June 2020 


June 2023 agreement (£m)



















































































1 Payments stop once deficit eliminated.   
2 Excludes a £500m direct contribution and a £180m ABF payment made to the BTPS before 30 June 2023   
3 Direct payments are due by 30 April each year. £10m per year is payable to the BTPS. BT Group currently intends to the pay the balance into the co-investment vehicle.

3.6 BT Group will continue to make annual contributions towards the cost of administering the BTPS (down from £30m pa at the 2020 valuation to £27m pa), and Pension Protection Fund levies (which have reduced substantially since the last valuation, from £30m in 2020 to around £4m in 2023).

4. Stabiliser mechanism

4.1 As part of the 2020 valuation, BT Group and the BTPS put in place a stabiliser mechanism, comprised of a co-investment vehicle and future funding commitments.

4.2 The co-investment vehicle provides BT Group with some protection against the risk of overfunding by allowing money to be returned if not needed by the BTPS, enabling BT Group to provide upfront funding with greater confidence.

4.3 The future funding commitment agreed triggers an additional stream of contributions should the deficit fall materially behind plan.

4.4 Co-investment vehicle

4.4.1 Payments made by BT Group into the co-investment vehicle will be invested as if part of the overall BTPS investment strategy. The value of the assets held in the vehicle will be included in the assets of the BTPS for the purposes of calculating the both the funding deficit and the IAS 19 deficit.

4.4.2 BT Group is eligible for future refunds if some of the co-investment vehicle funds are surplus to the BTPS’s requirements, unless the BTPS, acting prudently but reasonably, decides to defer or reduce these payments. The period over which this will be assessed has been changed from a single date, 30 June 2034, to a series of dates between June 2032 and June 2042, improving the likelihood of a refund for BT Group as outcomes are no longer dependent solely on market conditions at a single date. BT Group will receive tax relief if and when any funds are paid to the BTPS from the vehicle.  BT Group is taxed on the investment gains in the co-investment vehicle, which are subsequently tax deductible if paid to the BTPS.

4.5. Future funding commitment

4.5.1 In the potential scenario that the funding deficit falls behind plan, i.e. the recovery plan is no longer sufficient to meet the deficit, BT Group has agreed additional contributions which will automatically be payable.

4.5.2 An annual payment stream is switched on should two consecutive semi-annual reviews of the funding position show the funding deficit has fallen behind plan. The reviews will be carried out every June and December, with the first review to take place at 31 December 2023.

4.5.3 Annual payments of £150m (2020: £150m) commence if the deficit is £1bn behind plan before the 2026 valuation, increasing to £300m (2020: £200m) if the deficit is £2bn behind plan before the 2026 valuation. Payments which have been triggered will be published as part of BT Group’s financial statements.

4.5.4 The first payment is due within 12 months of the payments being switched on. Payments will stop once the semi-annual reviews show the deficit is back on plan. Payments can switch on again if the deficit position subsequently deteriorates. Any payments under this mechanism cease by 30 June 2034.

5. Protections

BT Group has agreed to continue to provide the BTPS with certain protections to 2035.

5.1. Shareholder distributions

5.1.1 For the next three years, continuation of the protection which provides additional payments to the BTPS by the amount that shareholder distributions exceed a threshold has been agreed. The threshold allows for 10% pa dividend per share growth based on dividends of 7.7p per share in FY23, adjusted to reflect the interim dividend declared at our half-year results.

5.1.2 BT Group has agreed to consult with the BTPS if it considers share buybacks for any purpose other than relating to employee share awards.

5.1.3 BT Group has agreed to consult with the BTPS before making any shareholder distributions in any of the next 3 years if both annual normalised free cashflow of the Group is below £1bn in the year and distributions within the year would be in excess of 120% of the threshold in 5.1.1; or before making a special dividend.

5.2. Material corporate events

5.2.1 If in any financial year BT Group generates net cash proceeds from disposals above a threshold, BT Group will pay extra contributions. The proceeds are net of acquisitions and the threshold is £750m until the 2026 valuation.

5.2.2 The amount payable is one third of the net cash proceeds.

5.2.3 BT Group will continue to consult with the BTPS if: it considers making acquisitions or disposals with a consideration of more than £1bn in any 12 month period; it considers making a Class 1 transaction which will have a material impact on the  BTPS; or it is likely to be subject to a takeover offer.

5.2.4 BT Group has also agreed to consult the BTPS should there be other corporate or third-party events which may have a materially detrimental impact on BT Group's covenant to the BTPS and use best endeavours to agree appropriate mitigation.

5.3. Negative pledge

5.3.1 Continuation of the protection that future creditors will not be granted superior security to the BTPS in excess of £0.5bn, to cover any member of the BT Group. Business as usual financing arrangements do not trigger this protection.

About BT Group

BT Group is the UK’s leading provider of fixed and mobile telecommunications and related secure digital products, solutions and services. We also provide managed telecommunications, security and network and IT infrastructure services to customers across 180 countries.

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 internationally; Openreach is an independently governed, wholly owned subsidiary wholesaling fixed access infrastructure services to its customers - over 650 communications providers across the UK.

British Telecommunications plc 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