British telecoms group BT said it would pay down its 4.1 billion pound ($6.5 billion) pension deficit more quickly than previously planned, removing uncertainty over the scheme and raising hopes it will pay a higher dividend in future.

Shares in the former telecoms monopoly leapt to a four-year high on Friday after it announced a lump sum payment into Britain's biggest private-sector pension scheme and then lower annual contributions for the next nine years, compared with its previous goal of clearing the deficit over 17 years.

Analysts said the new deficit estimate was also less than expected.

BT, which has been dogged in recent years by concerns over its pension scheme, said a new triennial valuation at the end of June put the deficit at less than half the size of the 9 billion pound shortfall when the scheme was evaluated in 2008.

This agreement under which the company makes an immediate contribution to the scheme of almost half of the deficit reflects BT's financial strength, chief executive Ian Livingston said.

BT's long-term sustainable cash generation has improved significantly since the 2008 valuation and we remain focused on improving BT's financial strength, investing in our future and enhancing shareholder returns.

Under the new plan, BT will make a lump sum payment of 2 billion pounds before the end of March, followed by nine deficit payments of 325 million pounds in March of each year.

That compared with a previous payment plan which ran over 17 years and started off with an annual payment of 525 million pounds which would then rise further.

Our sum-of-parts valuation for BT had assumed a net-of-tax pension deficit of around 5.1 billion pounds, Oriel Securities said. This will now have to fall. The difference is around a 25 pence per share boost to our estimate of BT's fair value.

BT's pension scheme has been a key area of concern for analysts and investors in recent years, after the company cut costs and improved its operations under Livingston to improve cash generation.

Espirito Santo analyst Will Draper said the early payment signalled BT wanted to get on the front foot with its pension but noted any dividend would be capped by certain conditions.

BT said it would pay more into the pension fund if its cumulative dividends exceeded its pension top-ups between 2012 and 2015. It must also pay a third of the proceeds into the pension fund if it makes any asset sales worth more than 1 billion pounds.

We note that consensus is assuming larger dividends than us, cumulative 3.05 billion pounds, which would require BT to make matching contributions to the pension fund, Draper said.

In reality, BT will be loath to do this and therefore it may be seen as a cap on any further increases to consensus dividend per share estimates.

At 09:05 a.m. British time, BT shares were up 6.8 percent at a four-year high of 235.2 pence, the biggest rise by a European blue-chip stock.

(Reporting by Kate Holton; Editing by Mark Potter)