BT 2016 Annual Report Download - page 195

201
Overview The Strategic Report Governance Financial statements Additional information
20. Retirement benefit plans continued
BTPS
At 31 March 2016 there were 301,500 members of the BTPS. Members belong to one of three sections depending upon the date they
first joined the Scheme. Section A is for members who joined before 1 December 1971, Section B is for members who joined the Scheme
between 1December 1971 and 31 March 1986 and Section C is for members who joined the Scheme on or after 1 April 1986 but
before the scheme closed to new entrants on 31 March 2001. The membership is analysed below.
At 31 March 2016
Number
of active
members
Number of
deferred
members
Number of
pensioners
Total
membership
Sections A and Ba13,000 29,000 176,000 218,000
Section C 22,000 40,000 21,500 83,500
Total 35,000 69,000 197,500 301,500
At 31 March 2015
Sections A and Ba15,000 32,000 176,000 223,000
Section C 23,000 40,500 20,000 83,500
Total 38,000 72,500 196,000 306,500
a Section A and Section B memberships have been aggregated in this table as Section A members have typically elected to take Section B benefits at retirement.
Since 1 April 2009, when changes to member benefits and contribution rates were introduced, Section B and C active members have
accrued benefits based upon a career average re-valued earnings (CARE) basis and a normal pensionable age of 65. On a CARE basis
benefits are built up based upon earnings in each year and the benefit accrued for each year is increased by the lower of inflation or the
individual’s actual pay increase in each year to retirement. Benefits earned for pensionable service prior to 1 April 2009 are based upon a
member’s final salary and a normal pensionable age of 60. Under the Scheme rules the determination of the rate of inflation for statutory
minimum rates of revaluation and indexation for the majority of benefits is based upon either the Retail Prices Index (RPI) or the Consumer
Prices Index (CPI) which apply to each category of member as shown below.
Active members Deferred members Pensioners
Section Ba Benefits accrue on a CARE basis increasing
at the lower of RPI or the individual’s actual
pay increase
Preserved benefits are revalued before
retirement based uponCPI
Increases in benefits in payment are
currently based upon CPI
Section C Increases in benefits in payment are
currently based upon RPI up to a maximum
of 5%
a Section A members have typically elected to take Section B benefits at retirement.
Management of the scheme
BT Pension Scheme Trustees Limited (the Trustee) has been appointed by BT as an independent trustee to administer and manage the
scheme on behalf of the members in accordance with the terms of the Trust Deed of the Scheme and relevant legislation. Under the
terms of the Trust Deed there are nine Trustee directors, all of whom are appointed by BT. The chairman of the Trustee is appointed after
consultation with, and with the agreement of, the relevant trade unions who are also responsible for nominating four directors to act as
representatives of the members. Ofthe remaining four directors, two will normally hold senior positions within the group, and two will
normally hold (or have held) senior positions in commerce or industry. Subject to there being an appropriately qualified candidate, at least
one of the Trustee directors is usually a current pensioner or deferred pensioner of the BTPS. Trustee directors are usually appointed for a
three-year term but are then eligible for re-appointment.
BTPS assets
Asset allocation
The allocation of assets between different classes of investment is reviewed regularly and is a key factor in the Trustee’s investment policy.
Theallocations set reflect the Trustee’s views on the appropriate balance to be struck between seeking returns and incurring risk, and on
the extent to which the assets should be distributed to match liabilities. Current market conditions and trends are regularly assessed which
may lead to adjustments in the asset allocation. The BTPS also uses financial instruments to balance the asset allocation and to manage
inflation risk, interest rate risk, longevity risk, liquidity risk and foreign currency risk.
Under IAS19, plan assets must be valued at the bid market value at the balance sheet date. For the main asset categories
– securities listed on recognised stock exchanges are valued at closing bid prices;
– properties are valued on the basis of open market value;
– unlisted equities are valued in accordance with International Private Equity and Venture Capital (IPEVC) guidelines;
– unlisted fixed interest and index-linked instruments are valued using the latest market price or using discounted cash flow models that
consider credit risk.