UK - The BT pension fund has moved from a £2bn (€3.5bn) deficit last year to a £1.5bn pensions surplus, thanks to improved market conditions and extra deficiency payments, the telecommunications group has reported.

Managed by Hermes, BT is Europe's fifth-largest pension fund with £39.7bn in asset under management, but has managed to improve its position over recent months thanks to a final £320m pensions deficit payment, BT Group reported today in its second quarter and half-year interim results to September 30 2007.

BT announced in May this year (see earlier IPE story: BT warns IFRS makes £1bn surplus volatile) it was finally back in actuarial surplus under IAS19, so this latest improvement is likely in part to be as a result of improved bond values given recent market conditions as well as growing in part thanks to £210m income.

 "The improvement in the position compared to the prior year is the result of a combination of factors, including the payment of deficiency contributions of £840m, increases to the market value of scheme investments and an increase to the AA bond rate used to determine the present value of scheme liabilities," stated the BT results report.

Net finance costs to BT rose to £92m because net finance income on the closed defined benefit pension scheme remained flat at £105m.

Total contribution of £840m has been made to the pension fund since last year, according to the BT results, and the last of £320m has now been made, at least until the triennial funding valuation of December 31 2008.

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