Annual Report and Accounts 2020 - BTPS

1 Annual Report and Accounts the BT Pension Scheme 3 Chair s statement 4 Trustee Board 7 CEO s update 9 About BT Pension Scheme Management Limited (BTPSM) 12 Report by the Trustee - Funding and investment 15 - Member services 28 - Governance of the Scheme 32 Statement of Trustee s responsibilities in relation to the audited financial statements 35 Understanding the financial statements 37 Independent auditor s Report 38 Independent auditor s statement about contributions 40 Summary of contributions 41 Consolidated fund account 42 Consolidated statement of net assets 43 Notes to the financial statements 44 Actuary s statement and Report on actuarial liabilities 72 Technical provisions

2 Statement 76 Appendix one: Climate change and TCFD Disclosure 77 Appendix two: Trustee Board Committees 84 Appendix three: Management and advisers 87 Appendix four: Glossary of terms 88 Contact details 90 BTPS Annual Report and Accounts 2020 2 ContentsThe Scheme s net assets were valued at as at 30 June overall investment return on the Scheme s assets was % for the year to 30 June Scheme s funding position was 88% on a technical provisions basis as at 30 June at 30 June 2020, there were 280,004 Scheme s net assets were invested 3 7.

3 5 % in growth assets and in liability hedging assets as at 30 June benefits paid were in the year to 30 June BTPS BTPSAt a glanceThe BT Pension Scheme (BTPS or the Scheme) is the largest company pension scheme in the UK and one of the largest pension funds in Europe. A defined benefit pension scheme for employees, former employees and dependants of BT Group plc (BT) and some of its associated companies, the Scheme closed to new members in 2001 and to future accrual for most members in June 2018. The Scheme s Trustee is BT Pension Scheme Trustees Limited, a corporate Trustee with ultimate fiduciary responsibility for the Scheme and its members.

4 The Trustee s key responsibility is to ensure that BTPS pays benefits as they fall information on the Trustee Board and Scheme governance can be found on page 7 and page 32 The Trustee Board has delegated responsibility for day-to-day management of the Scheme to BT Pension Scheme Management Limited (BTPSM, a wholly owned subsidiary of the Scheme), the primary service provider to BTPS, subject to ongoing Trustee Board oversight. BTPSM is also the principal investment advisor to the information on BTPSM and its Executive can be found on page 12To fulfil its key responsibility, the Trustee must ensure that the Scheme is (i) adequately funded; (ii) has an appropriate investment strategy, having regard to the Scheme s liabilities, support available from BT, the sponsoring employer, and the profile of its members; and (iii) is administered and run in a way which demonstrates an appropriate level of care, skill and value for money for members.

5 The Report on Funding and Investment can be found on page 15 and the Member Services Report can be found on page 28 BTPS Annual Report and Accounts 2020 3As I write this, the UK continues to face a period of uncertainty through the societal and economic impacts of the COVID-19 Trustees, our priority is to ensure that our members receive their benefits as they fall due. Consistent with this, our focus during the pandemic has been to seek assurances from our primary service provider, BT Pension Scheme Management (BTPSM), that it is able to continue to deliver the full range of services on which we rely.

6 I am pleased to Report that BTPSM continues to operate with no interruption to the services provided to our members. We have also managed to advance our shared transformation agenda which will deliver improvements in terms of member experience and operational risk reduction in the coming months. This year, I have asked Morten Nilsson (BTPSM CEO) to provide a Report which focuses on the key activities within BTPSM during the the year, we monitored BTPSM s delivery and operational effectiveness by reference to service performance measures which cover the three service lines (Member Services, Funding and Fiduciary Services, and Trust and Business Services).

7 The backdrop to establishing these metrics included the valuable feedback that we received from our new Members Panel. I would like to thank the 8,500 members who participated in our recent survey, of whom 1,500 agreed to participate on the Members Panel to provide us with further insights which will inform our member communications, particularly regarding the development of digital services. It was also clear from the survey that our commitment to responsible investment resonates positively with ServicesThe July 2019 decision to insource the member contact centre generated excellent feedback from members.

8 It was also good to see the operational resilience demonstrated when we moved to remote working in March 2020. We will build on this as we move to a new administration platform in 2021 which aims to further enhance member performanceIn a year that has seen significant market volatility, the Scheme produced an investment return of , made up of a return of on growth assets and on matching assets. This brought the annualised Scheme return over the past three years to per year. More detail on the Scheme s investment performance is included within the Funding and Investment section of the Trustee s statement BTPS Annual Report and Accounts 2020 4In a year that has seen significant market volatility, the Scheme produced an investment return of ThoresenChair of Trustee BoardThe Trustee remains committed to being a responsible investor and articulates this commitment through its responsible investment mission statement (which was updated in January 2020).

9 The Scheme s investments should be managed to create sustainable long-term value, supporting the generation of optimal investment returns to ensure the Scheme can pay all benefits in full . We have also updated our Statement of Investment Principles (available at ) to provide more information on our approach to stewardship and the mandates we give to investment relation to climate change, the Trustee believes that reducing exposure to carbon emissions over time will improve investment outcomes and reduce the impact of potential adverse outcomes associated with future climate risk.

10 Consistent with our leadership in this area over the years, the Trustee has established a challenging goal for the Scheme s investment portfolio to achieve net zero carbon emissions by ValuationOur key task for the year ahead is the funding valuation as at 30 June 2020. It is a requirement that an actuarial valuation of the Scheme is carried out at least once every three years. With BTPSM s advice and support, and the support of our other advisers, work is underway. The statutory deadline for completing the valuation exercise is 30 September 2021.