Bell Canada says it plans to make a $750-million payment toward its defined benefit pension plan to help improve its funded status.

The company says the payment will be funded from cash on hand at the end of 2012.

It says the pension pre-payment is tax deductible and expects to realize $200 million in tax savings in 2013.

The pension plan's financing costs will benefit from the stronger position of the plan and therefore will help increase earnings by two cents per share starting next year.

"Accelerating the funding of Bell's future pension obligation is an efficient use of our cash given the backdrop of a persistently low interest rate environment," said Siim Vanaselja, chief financial officer at BCE and Bell Canada.

"With this contribution, which preserves the pension plan's funded status at a high level, we expect Bell's normal pension funding and cash income taxes for 2013 to be maintained at a similar level to 2012. This action both de-risks the pension plan and improves Bell's longer term financial flexibility to enhance returns to our shareholders through reduced future pension funding requirements and expense."

As a result of the payment, BCE reduced its projected free cash flow for the year to between $1.6 billion and $1.75 billion from an earlier projection of between $2.35 billion and $2.5 billion before the pension payment.