"Since all the scheme's liabilities are in pounds, our exposure to U.K. assets is likely to continue to increase," Otto Thoresen, chair, said in the report.
The deficit fell by 15.5% over the year and by 53.6% over the three years ended June 30, according to its separately published triennial valuation document. The funding ratio was 91% as of June 30, down slightly from 92% a year earlier, but up from 88% as of June 30, 2020.
BTPS transferred £16 billion of liabilities in 2014 through a longevity swap, and a further £5 billion through a longevity swap in July this year — occurring after the annual report date. Assets were down 20.5% over the year and down 35.1% over the three years ended June 30.
Executives at the pension fund increased allocations to cash flow-focused assets, including sovereign debt, investment grade credit, sub-investment grade credit and cash. As of June 30, 71% of assets were invested in these securities, vs. 58.8% a year earlier. The remaining assets were invested in equity and equity-like assets, including equities, real estate, absolute return and infrastructure.
The sponsoring employer, BT Group, has already made £4.4 billion of deficit contributions. Its future annual contribution payments remain unchanged at £600 million in each financial year until March 31, 2030, with a final £490 million payment to be made before April 30, 2030. BT Group will also continue to pay £180 million each year in an asset-backed funding arrangement, which was agreed at the 2020 triennial valuation.
The pension fund's asset allocation as of June 30 was 28% government bonds, cash and other net assets; 25% corporate bonds; 14% equities; 14% secure income; 9% real estate; 3% each to absolute return, infrastructure, and high-yield corporate bonds; and 1% to emerging markets debt.
By region, exposure was 67% to the U.K., 14% U.S., 11% Europe and 8% to other markets.