This is my second annual report to you, the members of the BBC Pension Scheme. I could not have imagined when I wrote the introduction to my first report how all our lives would be turned upside down by the global pandemic.

While this continues to cause massive disruption at home and abroad, the Pensions Executive Team and staff have continued to run your pension scheme. I believe we have been able to do that with remarkable success. Pensions continue to be paid, new pensions are put into payment and members’ emails, letters and phone calls are answered. We have even made improvements to our processes and services through the period of lockdown.

The Trustees have also completed the triennial actuarial valuation process and agreed with the BBC a revised funding plan which targets reaching a fully funded position by 31 December 2028. Further details of the valuation and the up-to-date funding position are set out later in this report.

Most importantly, against a background of very turbulent investment markets in the

last few months of the year, the Scheme’s investment portfolio, managed by our in-house team, has proved resilient. We finished the year at 31 March with the value of our investment portfolio at the same level as 12 months previously, despite markets generally being significantly lower. Although the valuation of the Scheme’s liabilities increased over the year, the Trustees are encouraged by the recovery of markets since the year-end, and our long-term funding plan remains on track.

Inevitably, some of our plans for the coming year have had to be postponed or modified. Our pre-retirement seminars for active members continue, now over a video link rather than face to face, but the regional membership meetings we were planning for the second half of 2020 cannot take place in current conditions. We hope that these and other activities will resume in more normal future years.

I hope you all keep well meanwhile.

Catherine ClaydonChair of the Trustee Board

Welcome to the 2020 Summary Report

2

Catherine Claydon Chair of Trustees

At a glance • The Scheme

provides benefits to 61,317 members.

• The market value of the Scheme’s assets stayed level at £17.3bn.

• The 2019 funding level was 94% (2016: 88%).

3

Changes to the Trustee BoardThere have been some changes to the Trustee Board during the year covered by this report and also since the end of the Scheme’s financial year.

Peter Johnston was appointed as a BBC Trustee from 1 April 2019, after Anne Bulford stepped down as a BBC Trustee on 31 March 2019. Leslie Huss-Smickler was re-elected to serve a six-year term as the Pensioner Trustee from 1 January 2020.

On 13 April 2020, Rostam Kilgour, one of our Member Trustees, stepped down from the Board. A nomination process was held among the employed members and Kristina Block was elected as Rostam’s replacement. Her term will run from 1 June 2020 to 30 April 2022 (i.e., the balance of Rostam’s term rather than a full six-year term).

TrusteesCatherine Claydon(Chair and Independent Trustee)

Kristina Block(Member Trustee)

Kevin Carter(Independent Trustee)

Grant Cassidy(Member Trustee)

Martyn Freeman(BBC Trustee)

David Gallagher(Member Trustee)

Trustee News

For full Trustee biographies visit bbc.co.uk/mypension

Eileen Haughey(Independent Trustee)

Leslie Huss-Smickler(Pensioner Trustee)

Glyn Isherwood(BBC Trustee)

Peter Johnston(BBC Trustee)

David Jordan(BBC Trustee)

4

Valuation reportEvery three years, the Trustees arrange a full actuarial valuation of the Scheme. The valuation by the Scheme Actuary gives an up-to-date picture of the cost of providing the future benefits to be paid to members (‘the liabilities’) and how that compares with the value of the assets held in the investment fund.

If the Scheme’s assets are lower than its liabilities, it’s said to have a ‘shortfall’ (also known as a ‘deficit’). A shortfall doesn’t mean that the Scheme won’t be able to pay members’ benefits in full, as after each triennial valuation the Trustees and the BBC are required to agree a funding plan to eliminate the shortfall by a specific date.

The latest full three-yearly valuation was carried out with an effective date of 1 April 2019. The Actuary also carries out less detailed annual interim valuations of the Scheme’s funding position, which is a snapshot on a particular date - in our case, 1 April 2020. This unfortunately coincided with the coronavirus outbreak, but since that date investment markets have bounced back (see page 8).

How has the funding position changed?When the last three-yearly valuation was carried out in 2016, there was a shortfall of £1.8bn. Between 2016 and 2019, the liabilities increased by £3.7bn, mainly as a result of the continuing fall in long-term interest rates, which increases the value placed on the liabilities. However, over the same three years, the assets increased by more – £4.4bn – because of higher-than-expected investment growth and the payment of BBC contributions. This meant that by April 2019, the funding level had improved to 94% and the shortfall reduced to £1.1bn.

Between April 2019 and April 2020, the value of the Scheme’s liabilities showed a further increase, largely because of continuing reductions in interest rates. On the other hand, investment markets generally fell sharply in March 2020 as they reflected the coronavirus pandemic and the prospect of global economic contraction. As a consequence of these market movements, the value of the Scheme’s assets did not keep pace with the increase in liabilities in the last quarter and was unchanged at £17.3bn. The shortfall therefore increased over the year to £1.9bn.

5

What’s being done about the shortfall?Following the 2019 valuation, the Trustees and the BBC agreed a revised contribution plan for the Scheme to recover the shortfall so that, if the funding position develops as currently projected, the Scheme would be fully funded by 31 December 2028. This is the same target date as was adopted after the 2016 valuation.

Investment markets have recovered significantly since March 2020, and the Trustees believe that the revised contribution plan remains appropriate in spite of the deterioration of the funding position shown in the interim valuation as at April 2020.

The Trustees continue to monitor the funding position carefully and maintain a financial management plan, which provides for progressive reduction of investment risks and outlines what actions could be taken if the funding position should worsen.

2016 valuation(1 April 2016)

2019 valuation(1 April 2019)

2020 interim valuation(1 April 2020)

Assets £12.9bn £17.3bn £17.3bn

Liabilities £14.7bn £18.4bn £19.2bn

Shortfall £1.8bn £1.1bn £1.9bn

Funding level 88% 94% 90%

Factors reviewNow that the triennial valuation has been completed, the Trustees of the Scheme and the BBC have turned their attention to reviewing the Scheme’s actuarial factors, which are used to calculate certain benefit options. This includes cash-equivalent transfer values, the rate at which pension may be exchanged for a cash lump sum when you start to take your benefits, and the reduction applied if you decide to take your pension early (before reaching normal pension age). Once the review is finished, we will share the details with members.

6

Valuation report continued

Shortfall on winding up As part of the valuation, the Actuary also looks at the funding level if the Scheme was wound up.

Including this information does not mean that the BBC or the Trustees are planning to wind up the Scheme. The Trustees are required by law to give you this information.

If the Scheme had wound up as at 1 April 2019, the Actuary estimated that the Trustees would have had to pay an insurance company £23.6bn to provide all the benefits in full. This would have meant that the Scheme had a shortfall of around £6.3bn (2016: £7.9bn) and a funding level of 73% (2016: 62%).

Pension Protection Fund The Pension Protection Fund (PPF) was set up in 2005 to compensate members of eligible UK pension schemes which are wound up when the employer is insolvent and the scheme does not have enough assets to cover members’ benefits. All eligible pension schemes are required to contribute to the PPF by paying a levy each year. The BBC reimburses the Scheme for the cost of the PPF levy in addition to the other contributions it makes to the Scheme.

Other information we need to tell you The Pensions Regulator has powers to modify future benefit accrual, intervene in a scheme’s funding plan or to impose a schedule of contributions. The Pensions Regulator has not needed to use these powers in relation to the Scheme.

There have been no payments to the BBC out of the Scheme’s funds since the last update to you.

The full 2019 and 2016 valuation reports and 2020 interim valuation are available at: bbc.co.uk/mypension

7

Finances

The full Report and Accounts are available at: bbc.co.uk/mypension.

Opening net assets of the Scheme at 1 April 2019 £17,279.3m

Total income £161.6m

Total expenditure (£515.4m)

Net return on investments £361.7m

Closing net assets of the Scheme at 31 March 2020 £17,287.2m

Accounts summary

The figures shown on this page include members’ Additional Voluntary Contributions.

Value of the Scheme

2015 2016 2017 2018 2019 2020

£17.3bn £17.3bn

£16.6bn£15.8bn

£12.9bn£12.9bn

COVID-19: special investment reportAfter a very strong run of investment returns over recent years, supported by steady economic growth and low interest rates, investment markets fell sharply in March 2020 as they reflected the coronavirus pandemic and the prospect of a severe global economic contraction.

However, global equity markets staged a remarkable recovery between April and the end of June, supported by extraordinary fiscal and monetary intervention and by emerging signs that major economies are recovering quite quickly from the partial suspension of economic activity that took place in March and April.

Since the beginning of April, the action by central banks to purchase bonds (known as quantitative easing) resulted in price increases of over 20% on the longest maturity index-linked Gilts. This resulted in a further decline in yields (the return an investor can expect to achieve from their bonds). The large sell-off in corporate bonds, which was perhaps the most dramatic feature of March’s market crisis, was largely reversed between April and July.

As a consequence of all these developments, the value of the Scheme’s assets rose sharply in the three months to the end of June 2020, from £17.2bn to £19.2bn. This equates to a return of about 12%, while the Scheme’s liabilities have increased by around 9%. Markets may well remain volatile, but following their recent improvement, the Scheme’s funding level is not significantly different from what it was before the crisis.

Looking ahead, several of our investment managers have been able to find opportunities in the crisis. However, we remain cautious about the ongoing market outlook and alert to the impact of a possible second coronavirus wave.

More information about the Scheme’s investments is available at: bbc.co.uk/mypension.

8

Managing your pension during COVID-19 The Pension and Benefits Centre staff have been working from home in line with Government advice. Despite the challenges, we were well prepared for an event like this and have continued to perform all the necessary Scheme administration. To help us maintain essential services to members, we have temporarily changed the opening hours for the pension service line (029 2032 2811) to 10am to 4pm. If your query is urgent, please call us but note that there may be a longer delay in answering your call than we would like. If you cannot get through, please leave a message and we will contact you as soon as we can. Please also remember that information relating to the Scheme can be found on our website bbc.co.uk/mypension. If you write to us or send an email to mypension@bbc.co.uk, we may take longer than usual to reply and we appreciate your patience. You can view your pension details and make certain changes via myPension online. You can view your pension payslips and P60s, or change your bank or address details. Active and deferred members can also run retirement quotes, cash-equivalent transfer values and benefit statements, and upload documents to myPension online.

If you haven’t already registered for myPension online and you would like to, please send an email to mypension@bbc.co.uk, quoting your National Insurance number. We will then send you your personal security number. Then visit mybbcpension.co.uk, click on the ‘register here’ tab at the bottom of the page and follow the instructions.

9

Scheme notices

10

Protect your dependantsOne of the most important things you need to tell the Trustees is who you would like to receive any benefits that may be payable in the event of your death. There are two forms that you should consider completing:

An Expression of Wish form tells the Trustees the person(s), charity or organisation that you wish them to consider paying any lump sum benefits to on your death. Lump sum benefits payable from the Scheme are held by the Trustees under a discretionary trust, which means that the Trustees decide to whom the benefits are payable. As the lump sum benefit is paid under a discretionary trust, it does not form part of your estate and is therefore free of inheritance tax.

A Nominated Dependant form. Your husband, wife or civil partner will normally be entitled to a pension on your death. If you are single, divorced, separated from your spouse or widowed, and not in a civil partnership, then you may be able to nominate a dependant to receive a pension similar to that which would be payable to a spouse or civil partner following your death.

You can find out more about the Scheme’s benefitspayable on death at bbc.co.uk/mypension. You can download the form(s) from the Scheme website (bbc.co.uk/mypension). After completing your form this can be uploaded to the myPension portal, or emailed to mypension@bbc.co.uk.

2020 pension increase

Old and New Benefits

Career Average Benefits (2006)

Career Average Benefits (2011)

2.2% 2.2%

1.3%

Pension increases awarded on 1 April 2020 ranged from 1.3% to 2.2%, depending on the section of membership to which members belonged. No discretionary increases were awarded.

These increases are based on the rise in the Retail Prices Index (RPI) or (for CAB2011) the Consumer Prices Index (CPI) for the previous calendar year ending 31 December.

Lifetime AllowanceThe Lifetime Allowance is the maximum amount of pension savings you can have at retirement from all pension schemes without incurring an additional tax charge.

From April 2020, it increased to £1,073,100.Beware of scamsThe number of reported cases of pension fraud has more than doubled during the pandemic, as scammers capitalise on savers’ fears. Action Fraud has reported that almost half a million pounds has been lost to pension scams during the pandemic.

We urge you to be vigilant for scams that could appear over the coming months. These could be about insurance policies, pension transfers or ‘opportunities’ in unusual investments like ‘crypto-assets’, overseas property, renewable energy bonds, forestry, parking or storage units.

While promising high returns and low risk, in reality, pension scams can leave you with nothing. In addition, you could face a high tax bill from HM Revenue & Customs if you withdraw your savings before age 55.

For more information about pension scams and how to avoid them, please go to fca.org.uk/scamsmart.

Annual AllowanceThe Annual Allowance (AA) is the most pension savings you can make in a year before you have to pay tax. It is normally £40,000 but may be reduced if you are a high earner. From April 2020 the levels of income at which the AA starts to reduce increased significantly. This means fewer people will be affected than in previous years - although the very highest earners will see a greater reduction in their AA. To find out more, go to gov.uk/tax-on-your-private-pension.

Pensions News

11

Answering your questionsIf you have a question about the Scheme or your pension, please call the pension service line: 029 2032 2811

Help and Support

12 Produced by Pension and Benefits Centre - September 2020

The pension service line is open on reduced hours currently, between 10am and 4pm, Monday to Friday.

If you would rather write to the team, please email: mypension@bbc.co.uk

or send a letter to: Pension and Benefits Centre 3 Central SquareCardiff CF10 1FT

Before you contact us though, do remember that there is plenty of information about the Scheme at: bbc.co.uk/mypension