BT Group (BTA) investor relations material

Key messages and pension scheme overview

• Two main measures for pension obligations are IAS 19 and funding deficits, each with different methodologies and implications for contributions and regulatory frameworks.

• The BT Pension Scheme (BTPS) is the primary plan, representing about 97% of retirement liabilities, managed by an independent trustee with oversight from the pensions regulator and supported by Brightwell and independent advisers.

• Defined benefit (DB) plans expose the sponsor to investment and longevity risks, while defined contribution (DC) plans do not.

• Benefits are projected to be paid over 60 years, with an average liability term of about 10 years.

• Deficits have broadly reduced over time, aided by asset-backed funding and de-risking strategies.

Investment strategy and risk management

• The investment strategy has been progressively de-risked since 2017, reducing growth asset exposure and targeting a mainly bond and bond-like portfolio by 2034.

• BTPS maintains a diversified investment strategy, with 27% in growth assets and the rest in bond-like assets.

• Derivatives are used to hedge interest rate, inflation, and longevity risks, significantly reducing deficit volatility.

• Asset valuations are robust, with most assets valued at each annual update and strong audit controls; a multi-layered assurance process is used for unquoted assets.

• Recent asset performance was impacted by market conditions and specific write-downs, such as the Thames Water equity stake.

Funding position and deficit evolution

• The funding deficit was GBP 3.7 billion as of June 2023, with a rolled forward value of GBP 3.2 billion in June 2025.

• Deficit contributions are structured through an asset-backed funding arrangement (ABF) and a co-investment vehicle, allowing for potential refunds if surplus arises.

• The stabiliser mechanism triggers extra contributions if the scheme falls behind schedule, with reviews every June and December.

• Payments to address the deficit are scheduled through 2034.

• No benefit from the Crown guarantee is included in the funding valuation.