British Airways has agreed to pay £300 million a year plus top-ups into its pension scheme over the next decade.

The new agreement leaves room for the airline to pay dividends to owner International Airlines Group.

IAG said the new funding deal was based on a valuation of the scheme’s position at the end of March 2015, which put the technical deficit at £2.8 billion, compared with £2.7 billion recorded three years earlier.

Under the deal, BA will make fixed deficit contributions of £300 per year until 2027 – broadly in line with the amount it paid under a previous three-year term.

Depending on the airline’s cash levels, it could also pay up to an additional £150 million into the scheme each year.

The agreement, based on a triennial valuation of the pension scheme’s position, lifted shares in IAG yesterday by almost 21p to more than 422p 

The airline has two pension schemes and the agreement announced yesterday related to its largest scheme, the New Airways Pension Scheme.

IAG said the assets in the scheme had increased by £3.7 billion  to £13.3 billion by March 2015, compared with three years’ earlier, while the liabilities rose by £3.8 billion to £16.1 billion pounds over the same period.