Building giant Balfour Beatty has agreed a deal to plug a £375 million hole in its pension fund.
The group has reached an eight-year funding agreement with trustees of the pension scheme to pay a one-off £40 million sum and also to double its annual deficit contributions to £48 million.
Balfour has more than 40,000 members in its defined benefit pension scheme, which closed to new members in 2007.
The group had agreed in 2008 to make payments into the scheme of £24 million a year, but the funding gap has soared in recent years – from around £114 million at the time of the last triennial review in 2007.
Balfour said it had already increased the annual contributions to £36 million since April in anticipation of a greater funding need after the latest scheme valuation. Its new agreement will also see contributions rise by inflation-linked increases every April.
Shares in Balfour rose nearly 2% as news of the deal ended uncertainty over its pension funding.
Mark Howson, analyst at Royal Bank of Scotland, said the contributions were unlikely to impact profit forecasts for Balfour, given that it had already increased annual payments to £36 million.
He added: “We remain buyers of Balfour Beatty, with our belief that the share price rating very much overplays the effects of the Comprehensive Spending Review on the business.”
The pension news comes after Balfour recently announced its subsidiary Mansell Construction services was buying Rok’s social housing arm in the South West and North West out of administration.
Around 380 Rok employees will be transferred as part of the deal.