Analysts had expected the deficit to rise as record low interest rates and central bank bond buying programs crimped returns.
The cost of the first three years of the repayment plan however come in below the 2.6 billion pounds it paid in the last three years, reflecting the fact the trustees have more faith in the company's financial position.
With the pension plan in place, BT said it would upgrade its fiber broadband network to achieve speeds of up to 500 Mb across most of the country within a decade.
It will trial a new technology called G.fast and expects to deliver initial speeds of a few hundred megabits per second to millions of homes and businesses by 2020.
BT's fiber network, which currently boasts speeds of up to 76 megabits, currently passes 22 million premises, with 3.7 million now connected.
"Our superfast fiber broadband network now covers around three-quarters of the UK," Chief Executive Gavin Patterson said on Friday. "BT has been at the forefront of fiber innovation and investment. We aim to keep it that way."
The pension settlement and broadband plan are the latest developments in what is turning into a transformational year for BT. The firm is in talks to buy EE for 12.5 billion pounds to return to the mobile market and in February it will go head to head with arch rival Sky in the auction for football rights.
It announced the new plans as it reported third quarter results broadly in line with forecasts, with normalized free cash flow up 64 percent.