BT Group plc (BT.A) has announced the outcome of its 2026 triennial funding valuation for the BT Pension Scheme (BTPS), revealing the deficit has fallen from £3.7bn in June 2023 to £2.7bn at June 2026, with the funding level rising from 91.0% to 92.3%. The agreement introduces a package of zero-coupon bonds, revised contribution schedules, and £4bn of new security over EE Limited's shares. BT will provide £282m of additional funding via a zero-coupon bond maturing in 2033, which is expected to reduce the residual deficit to around £0.3bn. The deal also unlocks greater shareholder distribution flexibility, allowing up to £1.5bn in FY27, rising to £2.0bn by FY30.

Key Points

  • BT Group plc (BT.A), the UK's leading fixed and mobile telecommunications provider, listed on the London Stock Exchange
  • BTPS funding deficit reduced from £3.7bn (June 2023) to £2.7bn (June 2026); funding level now 92.3%
  • BT to issue five zero-coupon bonds via BT Finance plc, with maturities between 2027 and 2033 and combined par values totalling £2.68bn; additional £282m funding provided through a bond with a par value of £420m maturing in 2033
  • Investors will be watching whether BT can maintain its full-funding trajectory to 2030 and how the expanded shareholder distribution threshold affects dividend and buyback policy

BTPS Deficit Narrows to £2.7bn as Scheme Assets and Liabilities Both Contract Since 2023

At 30 June 2026, the BTPS held assets of £32.1bn against liabilities of £34.8bn, compared with assets of £37.2bn and liabilities of £40.9bn at the June 2023 valuation. The average discount rate used in the 2026 valuation rose to 6.1% from 5.3%, set at 1.0% per year above the gilt yield curve averaged over the scheme's lifetime. Average RPI inflation assumptions fell to 3.3% from 3.6%, while average CPI assumptions reduced to 2.8% from 3.2%. The scheme's investment mix as at 30 June 2026 stood at 74% bond-like assets and 26% growth assets, continuing a de-risking strategy first established in 2017.

BT Finance plc to Issue Five Zero-Coupon Bonds Replacing Prior Scheduled Deficit Contributions

Under the 2026 agreement, BT Finance plc will issue five zero-coupon bonds to the BT-BTPS co-investment vehicle, replacing the majority of previously scheduled cash deficit payments from FY28 to FY31. The bonds carry par values and maturities of £590m (April 2027), £590m (April 2028), £590m (April 2029), £490m (April 2030), and £420m (September 2033). A direct payment of £30m to the BTPS will be brought forward to FY27. BT will continue annual payments of £180m under the asset-backed funding arrangement secured on EE Limited that was established in 2021, running through to 2033.

New £4bn Security Over EE Shares and Revised Shareholder Distribution Thresholds Agreed

As part of the wider package, BT has granted the BTPS a new charge over EE Limited's shares providing £4bn of insolvency protection until 2040, with any payment on insolvency capped at the lower of £4bn and the BTPS solvency deficit. BT Group Chief Financial Officer Patricia Cobian stated the agreement "supports our capacity to continue to invest in next-generation networks and transform BT." The revised protections raise the shareholder distribution threshold to £1.5bn in FY27, up from £1.0bn under the 2023 agreement, with 10% annual dividend per share growth assumed for FY28 and FY29, increasing flexibility for capital returns.

No Further Deficit Contributions Expected as BTPS Targets Full Funding by 2030

Once the zero-coupon bonds are in place, the residual BTPS deficit is expected to reduce to approximately £0.3bn, which the announcement states will be met by investment returns above the prudent discount rate, with no further deficit contributions anticipated. Administration expense contributions will also end on 30 June 2032, two years earlier than under the 2023 agreement, delivering a £62m present-value saving. BT and the BTPS have additionally agreed principles for handling any deficit identified at the 2029 valuation, with an initial payment of £300m followed by annual contributions of £600m until cleared, applicable on deficits of up to £2bn through 2040.