BT Group (BTA) Investor update summary

Funding and accounting position

• IAS 19 is a formulaic accounting measure using AA-rated corporate bond discount rates; Funding uses prudent assumptions to set triennial cash contributions and reflects investment strategy. The measures are not directly comparable.

• The Funding deficit was £3.7bn at 30 June 2023; the BTPS annual report showed a rolled-forward deficit of £3.2bn at June 2025.

• The £2bn ABF issued in May 2021 reduced the Funding deficit, not the IAS 19 deficit; the Crown guarantee has no value in the Funding valuation and does not reduce the deficit.

• The triennial Funding valuation is as at 30 June 2026 and covers regulation, membership data, covenant strength, assumptions including longevity, future contributions and legal protections.

• De-risking has narrowed the range of Funding outcomes and broadly reduced deficits over time, supported by asset-backed funding.

Investment strategy and risks

• BTPS held £31bn of assets at 31 March 2026, with more than a quarter in growth assets and ~£25bn with quoted prices in active markets; another summary reports 27% in growth assets.

• Growth assets have declined from 46% in 2017; the portfolio is expected to be predominantly bond-like by 2034, targeting income and capital repayments to meet benefits while retaining growth assets for returns.

• The scheme intends to remain broadly fully hedged against interest-rate and inflation risks; growth assets and longevity remain key exposures, with ~half of mortality risk hedged.

• In a scenario with a 1.2% fall in long-term rate expectations, liabilities rose £5.3bn, bond assets rose £3.8bn and derivatives gained ~£1.2bn, leaving £0.3bn of net Funding exposure.

• Private credit is held through segregated funds designed for the investment lifecycle; portfolio liquidity was described as sufficient, and asset valuations are subject to annual updates and audit controls.

Recent performance and valuation context

• The FY2026 IAS 19 deficit increased £0.1bn overall: £0.8bn of deficit contributions, including £180m via the ABF, was offset by £0.6bn of lower-than-expected asset returns and £0.1bn of experience headwinds.

• Thames Water equity exposure was written down by ~£300m; debt exposure was sold before it needed to be written down.

• Asset-return attribution under accounting rules separates asset and liability movements; Funding liabilities differ from IAS 19 liabilities, limiting read-across between the measures.

• Mortality trends remain uncertain, with factors including Covid-19, NHS strain and new drugs.