Bank of England Pension Fund Report and Financial ......with an Actuarial Certificate, Independent Auditor’s Report, Financial Statements and Notes, Independent Auditor’s Statement

Pension FundReport and Financial Statements 2020

Pension FundReport and Financial Statements for year ended 29 February 2020

1 Trustee Directors, Managers and Professional Advisers3 Trustee Report14 Actuary’s certification of Schedule of Contributions15 Independent Auditor’s Report to the Trustee17 Fund Account17 Statement of Net Assets18 Notes to the Financial Statements25 Independent Auditor’s Statement about Contributions26 Summary of Contributions payable in the year27 Compliance Statement

Registration No. 10007558

Bank of England Pension Fund Report and Financial Statements 2020 1

Trustee Directors, Managers and Professional Advisers

TrusteeBE Pension Fund Trustees LimitedTrustee DirectorsAnne Glover Bank-appointed (appointed 13 September 2019) (Chair) Christopher Bennell Pensioner-nominated (Deputy Chair)Ragveer Brar Member-nominatedAbigail Caldwell Bank-appointed (resigned 15 March 2019)David Collins Bank-appointed (resigned 6 November 2019)Matthew Corder Bank-appointed (appointed 11 November 2019)Jonathan Curtiss Bank-appointedEd Dew Bank-appointed John Footman CBE Bank-appointedCharlotte Gerken Bank-appointed (appointed 11 November 2019)Jethro Green Unite nominated Preeti Gulati Bank-appointed (appointed 11 November 2019)Shamir Patel Bank-appointed Nicola Veall Member-nominated

Investment Sub-CommitteeMembersRagveer Brar Trustee Director (Chair)John Footman CBE Trustee DirectorAnne Glover Trustee Director (appointed 13 September 2019)Jethro Green Trustee Director (appointed 16 April 2019)Shamir Patel Trustee DirectorNicola Veall Trustee Director

Attends by invitationAfua Kyei Chief Financial Officer

Administration and Governance Sub-CommitteeMembersChristopher Bennell Trustee Director (Chair) Jonathan Curtiss Trustee Director Ed Dew Trustee DirectorPreeti Gulati Trustee Director (appointed 11 November 2019)

Trustee Directors and Managers

Shamir Patel

Christopher Bennell Ragveer Brar

Jonathan Curtiss John Footman Charlotte GerkenEd Dew

Jethro Green Preeti Gulati Nicola Veall

Matthew CorderAnne Glover

2 Bank of England Pension Fund Report and Financial Statements 2020

Trustee Directors, Managers and Professional Advisers continued

Pension Trustee Support Unit (PTSU)

Secretariat

Geoff Winn Secretary

Pension Trustee Support UnitBank of EnglandThreadneedle StreetLondonEC2R 8AHTelephone: 020 3461 4671Email: [email protected]

Geoff Winn

Professional Advisers

Fund ActuaryJohn Batting FFA (from 1 January 2019)XPS Pensions Limited Albion, Fishponds RoadWokinghamRG41 2QE

Independent AuditorCrowe U.K. LLPSt Bride’s House10 Salisbury SquareLondon EC4Y 8EH

Legal AdviserSacker & Partners LLP20 Gresham StreetLondon EC2V 7JE

Investment ManagerLegal & General Assurance(Pensions Management)LimitedOne Coleman StreetLondon EC2R 5AA

Fund AdministratorEquiniti PaymasterSutherland HouseRussell WayCrawleyWest SussexRH10 1UH

Investment ConsultantXPS Investments Limited 11 StrandLondon WC2N 5HR

Medical AdviserDr Nadia Sheikh MBBS. MRCP. MFOM.Bank of EnglandThreadneedle StreetLondon EC2R 8AH

Bankers and CustodianCustomer Banking DivisionBank of EnglandThreadneedle StreetLondon EC2R 8AH

AVC ProvidersThe Prudential AssuranceCompany LimitedLaurence Pountney HillLondon EC4R 0HH

Standard Life Assurance LimitedStandard Life House30 Lothian RoadEdinburgh EH1 2DH

Utmost Life and Pensions Limited (formerly Equitable Life Assurance Society)Utmost House 6 Vale Avenue Tunbridge WellsTN1 1RG

Professional AdvisersThere are written agreements in place between the Trustee and the Fund Advisers.


IntroductionThe Trustee of the Bank of England Staff Pension Fund (‘the Fund’) presents its annual Trustee Report together with an Actuarial Certificate, Independent Auditor’s Report, Financial Statements and Notes, Independent Auditor’s Statement about Contributions, Summary of Contributions and Compliance Statement for the year ended 29 February 2020.

Constitution and GovernanceConstitution of the FundThe Fund is a defined benefit occupational pension scheme which provides benefits for employees of the Bank of England (‘the Bank’).

The Fund is established under trust, with a corporate trustee and is governed by a Trust Deed and Rules. The Final Salary and Career Average Sections had been contracted-out of the State Scheme under the provisions of the Occupational Pension Schemes (Contracting-out) Regulations 1996. With the cessation of contracting-out from 6 April 2016, all active Members accruing pension from that point onwards are contracted-in (and pay higher National Insurance contributions).

The Fund is approved by the Commissioners of the Inland Revenue as a retirement benefits scheme for the purposes of Chapter 1, Part XIV of the Income and Corporation Taxes Act 1988 and is treated as an ‘exempt approved scheme’ for the purposes of that Act. As an approved scheme the Fund has been automatically registered under the regulations which took effect from 6 April 2006.

The TrusteeThe Fund is managed by the Trustee on behalf of the Members in accordance with the Trust Deed and Rules. The Trustee is BE Pension Fund Trustees Limited, a company set up solely to act as corporate trustee of the Fund. The directors of this Company are listed on page 1.

Under the Trust Deed of the Fund, up to eight Directors are appointed by the Bank and four are nominated by the Members (two by active Members, one by pensioners and one by Unite the Union). Member and pensioner-nominated Trustee Directors are appointed for up to two three-year terms, after which a selection process is undertaken. In accordance with the Trust Deed, the Bank can at any time remove those Trustee Directors it has appointed.

During the year John Footman stood down as Chair to the Trustee Board and the Bank appointed Anne Glover (an independent trustee) as Chair from 13 September 2019. David Collins resigned as a Trustee Director from 6 November 2019 and more recently the Bank appointed Matthew Corder, Charlotte Gerken and Preeti Gulati as Trustee Directors from 11 November 2019.

The Trustee is responsible for the management and governance of the Fund. It usually meets at least four times per year with additional meetings as required. It has formed an Investment Sub-Committee (ISC) to oversee all investment matters and to make recommendations to the Trustee. There were four Trustee Board and three separate ISC meetings during the year under review, with one ISC meeting held jointly with a Board meeting. A Valuation Working Group oversees the triennial and interim valuations and makes recommendations to the Trustee. The Bank’s Chief Financial Officer is invited to all ISC and Valuation Working Group meetings.

There was one Valuation Working Group meeting in the year under review, to discuss and finalise the results and the Fund Actuary’s report to the Trustee on the interim valuation of the Fund as at 29 February 2019.

The Administration and Governance Sub-Committee held four regularly quarterly meetings to oversee governance matters, managements of the Pension Fund’s administrators and the implementation of the new Member self-service website. There were two additional meetings of the Sub-Committee in connection with the new administration services contract with Equiniti Paymaster.

In line with the Schedule of Contributions, the Bank paid contributions in the year of £98.8m (2019: £96.5m).

The Trustee has monitored the various Codes of Practice and related guidance material published during the year by the Pensions Regulator and other regulatory bodies, to ensure that the Fund and its administration are compliant and operate in line with best industry practice.

Trustee trainingPension legislation and best practice requires that the Trustee is regularly briefed. This is achieved through training and meetings with the Fund’s specialist advisers on a regular basis.

Trustee Report


As well as formal development activities, the Trustee keeps abreast of developments in the pension field through updates at regular Trustee meetings, circulars posted on the Trustee governance system (BoardPacks), online newsletters and seminars provided by its advisers. In addition, a dedicated training session was held for the Trustee Directors with its legal advisers.

Investment strategyThe investment strategy aims to provide a high degree of certainty in the financial position of the Fund, both for Members and the Employer.

The long-term investment objectives of the Fund are:

(i) To acquire low risk, government-guaranteed assets or high-quality supranational assets that will on an on-going basis provide as close a hedge to the cash flows of the Fund’s accrued liabilities as is practicable, having regard to transaction costs.

(ii) To limit the risk of assets failing to meet the liabilities over the long term.

The strategic objectives of the Fund and the benchmark for the allocation of the Fund’s assets are reviewed at least triennially and more frequently if the circumstances require. A review is carried out 18 months after each full actuarial valuation, taking advice as the Trustee considers necessary, and after discussion with the Bank.

The strategic asset allocation is driven by the financial characteristics of the Fund, in particular the Fund’s liabilities, the security of the Bank’s covenant and the risk tolerance of the Bank and the Trustee.

The Trustee seeks to achieve the Fund’s objectives through investing in a mix of financial instruments, principally index-linked and fixed-interest gilts, HM Government guaranteed sterling bonds plus certain supranationals.

The Trustee, together with the Fund’s administrators, will ensure that it holds sufficient cash to meet the projected benefit commitments as they arise.

The cash flow from the portfolio has been designed to provide an income substantially matching the expected liabilities of the Fund to Members. However, the chosen investment strategy cannot provide a perfect match for the

Fund’s liabilities because there is insufficient granularity of assets available for investment; moreover, future payments to Members will also depend on non-financial aspects, in particular, how long Members live.

During the year Legal & General carried out various trades to align the investments held to the maturity of the pension liabilities and to maximise investment returns within the risk tolerances.

The increase to the value in assets, to £4.9bn, was primarily driven by a slight increase in gilt returns over the year.

The Trustee has considered the degree of financial risk from climate change in these investments and deemed it to be minimal. In any future change in investment strategy, the Trustee will take into account the impact and financial risks from climate change when making investment decisions.

During the year under review, the Trustee, consulting the Bank, began a review of the investment strategy to ensure that it remains appropriate and is sustainable in the long term. The Trustee also wants to ensure their Environmental, Social and Governance beliefs (ESG) are captured in the investment strategy, to be compliant with the regulatory requirements on ESG investing across all UK pension schemes.

Investment Sub-CommitteeTo ensure effective decision-making, the Investment Sub-Committee monitors and advises on investment issues. In the year under review, this Sub-Committee was chaired by Ragveer Brar, and now comprises six Trustee Directors (see page 1) plus the Chief Financial Officer of the Bank (who is not a Trustee Director). The Sub-Committee oversees the investment management function and makes recommendations to the Trustee but it has no executive powers.

Custody arrangementsUnder the Investment Management and Custody Agreement, primary custodial services are provided by the Bank’s Customer Banking Division. In accordance with normal practice, securities are registered in the name of the Bank’s own nominee company, but with the Fund identified as the beneficial owner. Where appropriate, the primary custodian is authorised to delegate responsibility for custodial and banking services to other custodian banks.

Trustee Report continued


Distribution of investmentsThe distribution of investments at the start and end of the year is shown above.

Employer-related investmentsThere were no employer-related investments within the meaning of Section 40 (2) of the Pensions Act 1995 held at any time during the year.

Investment management of assetsLegal & General has been the primary investment manager since 17 July 2007. The investment objective is to aim to match the liability cash flows as updated by the Trustee from time to time.

The following table shows the valuation and asset allocation of those assets held by Legal & General at the start and end of the year:

29 February 2020 28 February 2019

£000 % of £000 % ofAsset class total investments total investments

UK fixed-interest gilts 352,254 7.2 469,385 10.8UK index-linked gilts 2,982,055 60.7 2,525,119 58.1UK corporate index-linked securities 1,487,033 30.3 1,312,130 30.2Overseas pooled investments 1,135 0.0 1,241 0.0AVCs 1,389 0.0 1,426 0.0Cash and other investment balances 87,924 1.8 39,975 0.9

Total 4,911,790 100.0 4,349,276 100.0

Value and distribution held by Legal & General (excluding accrued income)

29 February 2020 28 February 2019

Asset class £000 % £000 %

UK fixed-interest gilts 352,254 7.2 469,385 10.8UK index-linked gilts 2,982,055 60.9 2,525,119 58.2UK other index-linked securities: 1,487,033 30.4 1,312,130 30.3Cash 77,486 1.6 28,887 0.7

Total Assets 4,898,828 100.0 4,335,521 100.0

The Weighted Modified Duration* (for the bond portfolio and its liabilities) is: Fixed-interest government bond portfolio — 10.71 years Index-linked government bond portfolio — 26.61 years Index-linked corporate bond portfolio — 17.51 years Total portfolio — 22.27 years

* Modified duration measures the sensitivity of an asset or liability to changes in interest rates (or inflation) and is broadly equivalent to the weighted average maturity of underlying cash flow.



The table below shows the absolute return on the portfolio managed by Legal & General during the year to 29 February 2020. It should be noted that the investment strategy now being followed is not designed to maximise return, but rather to maximise the probability that the Fund will be able to meet its liabilities in all future economic and financial conditions.

The return is the percentage change in value plus gross distributions.

The Trustee monitors the performance of the assets against the calculated liabilities of the Fund on a quarterly basis. This is to ensure that the investment portfolio is being managed to meet the liabilities, which is the investment objective. The investment performance measured on this basis was as follows:

Asset classPerformance (%)

— one yearPerformance (%)

— three years

Fixed-interest portfolio: UK fixed-interest gilts 11.8 13.2

Total fixed-interest portfolio 11.8 13.2

UK index-linked portfolio: Index-linked gilts 14.8 14.6 Other UK index-linked securities (Quoted and unquoted corporate)

14.3 17.9

Total index-linked portfolio 14.6 15.7

Total 14.3 15.4

Liability typeChange in value of liabilities

during the year (%)

Inflation-linked 14.2Fixed 10.8

Total 13.8


Risk managementThe Trustee Board has responsibility for internal controls and risk management. The Trustee is committed to identifying, evaluating and managing risk to the Fund and to implementing and maintaining control procedures to reduce significant risks to an acceptable level.

In order to meet this responsibility a Risk Register is maintained and its purpose is to:

• highlight the scope of the risks to which the Fund is exposed;

• rank those risks in terms of likelihood and impact; and

• identify management actions that are either currently being taken, or that it is believed should be taken, in order to mitigate the identified risks to an acceptable level.

The Risk Register is reviewed by the Administration and Governance Sub-Committee quarterly, and any proposed changes are then referred to the Trustee Board at each quarterly meeting. Every two years, the Risk Register is independently reviewed by a risk-specialist at Crowe U.K., the Fund’s external auditors. In line with the Pension Regulator’s guidance on integrated risk management, the Risk Register has been revised to meet best practice.

The main risks to which the Fund is exposed are:

Mortality risk — the assumptions adopted by the Trustee Directors make allowance for future improvements in life expectancy. However, if life expectancy improves at a faster rate than assumed, this would result in greater payments from the Fund and consequently increases in the Fund’s liabilities. In liaison with the Bank, the Trustee reviews the Fund’s mortality experience at each annual valuation and assumptions about future mortality are updated at each formal triennial valuation to minimise the risk of underestimating the Fund’s obligations.

Investment risk — the Fund invests the vast majority of its assets in a portfolio of UK government bonds as the changes in the value of the bonds most closely match the movements in the Fund’s liabilities. There are risks that the portfolio does not match the liabilities closely enough or

that as the portfolio matures there is a risk that the Trustee cannot reinvest the assets at the assumed rates. The Trustee Directors review the structure of the portfolio on a regular basis to minimise these risks.

Credit risk — this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Market risk — this comprises currency risk, interest rate risk and other pricing risks:

• Currency risk: the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in foreign exchange rates. This risk is largely negated as the investments held are 99.9% held in sterling denominated holdings.

• Interest rate risk: the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market interest rates.

• Other price risk: the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

Yield risk — a fall in government bond yields will increase both the Fund’s assets and liabilities. As the scheme’s liabilities, on the funding basis used to calculate the Bank’s contributions to the Fund, are greater than its assets, the liabilities would be expected to grow by more in monetary terms, increasing the deficit in the Fund.

Inflation risk — the majority of the Fund’s liabilities increase in line with inflation and so if inflation is higher than expected, the liabilities will increase. The Fund’s investment strategy is to hold government bonds that are also linked to RPI so this risk is greatly mitigated. The Government announced a consultation in 2019 on RPI versus CPI. The Trustee Directors will review the outcome and take any actions necessary.



Liquidity risk is divided into two types: funding liquidity risk (cash-flow risk) and market liquidity risk (asset risk):

• Funding (cash-flow) liquidity risk is when the Fund has a negative cash-flow position that cannot be realised to meet its regular payments. While most of the assets in the Bank of England Pension Fund investment portfolio are readily saleable, there are some, such as quasi-government bonds which are not as easily sold down to meet the monthly cash-flow requirements. The Trustee Board has identified such investments as Network Rail bonds as having a degree of liquidity risk. These assets are not due to mature until at least 2025 and do not present a liquidity risk at this time.

• Market (asset) liquidity risk is asset illiquidity. This is an inability to easily exit a particular investment. For example, certain investments cannot be disinvested immediately. Due to the current investment strategy being highly concentrated in government issued index-linked and fixed-income bonds, there are very few investments in the investment portfolio which are unsaleable or would require a lengthy period of staged disinvestment to exit.

Statement of the Trustee’s ResponsibilitiesThe financial statements, which are prepared in accordance with UK Generally Accepted Accounting Practice, including the Financial Reporting Standard applicable in the UK (FRS 102) are the responsibility of the Trustee. Pension scheme regulations require, and the Trustee is responsible for ensuring, that those financial statements:

• show a true and fair view of the financial transactions of the Fund during the Fund year and of the amount and disposition at the end of the Fund year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Fund year; and

• contain the information specified in Regulation 3A of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including making a statement whether the financial statements have been prepared in accordance with the relevant financial reporting framework applicable to occupational pension schemes.

In discharging the above responsibilities, the Trustee is responsible for selecting suitable accounting policies, to be applied consistently, making any estimates and judgments on a prudent and reasonable basis, and for the preparation of the financial statements on a going concern basis unless it is inappropriate to presume that the Fund will not be wound up.

The Trustee is also responsible for making available certain other information about the Fund in the form of an Annual Report.

The Trustee has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Fund and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control.

The Trustee is responsible under pensions legislation for preparing, maintaining and from time to time reviewing and if necessary revising a schedule of contributions showing the rates of contributions payable towards the Fund by or on behalf of the employer and the active Members of the Fund and the dates on or before which such contributions are to be paid. The Trustee is also responsible for keeping records in respect of contributions received in respect of any active Member of the Fund and for adopting risk-based processes to monitor whether contributions are made to the Fund by the employer in accordance with the schedule of contributions. Where breaches of the schedule occur, the Trustee is required by the Pensions Acts 1995 and 2004 to consider making reports to The Pensions Regulator and the Members.

Administration and other professional support servicesAdministration of the Fund is delegated by the Trustee to the People and Culture (P&C) Services Division of the Bank, and the Bank has sub-delegated the administration to a third-party provider, Equiniti Paymaster. The pension administration service was contracted to Equiniti Paymaster in 2012, and in 2015 the contract was extended by a further four years. The Bank and Trustee have reviewed and agreed a further extension of the administration services with Equiniti Paymaster for 10 years.


The administration of the Fund includes keeping Members’ records and the calculation and payment of Members’ benefits. The responsibility for the Bank’s pensions policy and the operation of day-to-day pension administration remains with the Bank.

The PTSU supports the Trustee in carrying out its responsibilities for governance, including relationships with the external investment manager and other advisers. Inside Pensions have been providing secretarial support services to PTSU and the Trustee since September 2018.

The Finance Division of the Bank maintains the financial records of the Fund and produces the Annual Financial Statements. The Trustee has a Service Level Agreement in place with the Finance Division and this Agreement is monitored regularly to ensure compliance and periodically reviewed to ensure that it remains appropriate.

Legal & General continued to be the primary investment manager. John Batting, as the Fund Actuary (assisted by his team at XPS) continues to provide actuarial advice and assistance and XPS Investment Limited (formerly Punter Southall Investment Consulting Limited) are investment advisers to the Fund. Custody of the Fund’s assets was provided by the Customer Banking Division of the Bank.

Crowe U.K. LLP continued to be the independent auditors to the Fund. Following the tender exercise in 2018, Andrew Penketh was appointed as the new Audit Partner to our account.

Service Level Agreements are in place with Legal & General and Equiniti Paymaster, and with the Bank’s Finance and Customer Banking Divisions.

The Administration and Governance Sub-Committee meets quarterly with the Equiniti Paymaster management team to review the services provided prior to the quarterly formal meetings with the Trustee Board. In addition, the PTSU meet with the administration team at Equiniti Paymaster on a monthly basis to review the service provisions and any small project matters. As in previous years, the Bank met the cost of providing these services to the Trustee, except for any investment management, banking or custody services costs, which were met by the Fund. The Trustee keeps all the costs associated with the running of the Fund under close review.

Preparation and Review of Financial StatementsThe Trustee confirms that the Financial Statements have been prepared and audited in accordance with regulations made under Sections 41(1) and (6) of the Pensions Act 1995. In addition, the report is fully compliant with the Statement of Recommended Practice (2015) requirements as issued by the Pensions Research Accountants Group (PRAG). The Independent Auditor’s Report on the Financial Statements appears on page 15. The Independent Auditor’s Statement about Contributions appears on page 25. The Financial Statements themselves, and notes thereon, are on pages 17 to 24.

Information to MembersAll employees are provided with a Career Average section booklet, which summarises the main benefits for Members. The booklet is also available on the Bank’s intranet. Individual benefit statements are provided to all serving Members (as part of their Total Reward Statement) and updated three times a year. Information to all other Members is on request. All Members have access to the Pension Fund Update report (a summary version of this document) as well as the annual Summary Funding Statement, both of which can be found on the new Member self-service portal which was introduced on 1 April 2020.

All Members are advised of the functions of the Pensions Ombudsman and The Pensions Regulator. Members have also been informed that the Fund is registered with The Pension Tracing Service, under registration number 10007558.

The Trust Deed and Rules may be seen in the office of the PTSU. Any enquiries relating to the management of the Fund should be addressed to that Unit. Enquiries about individual Member benefit entitlements should be directed to Equiniti Paymaster at [email protected] or on 01293 604119.



* Adjustments include for example, late notification of changes in Member status since the end of the previous year, or pension credit Members.

** Leavers include Members that left with less than two years’ pensionable service and were entitled to a transfer out.

Membership numbers reflect benefits payable; some Members are in receipt of two benefits, eg pensioners who also qualify for spouse’s allowances.

Deferred Members (salary link) are those Members who ceased Final Salary accrual but receive a CARE pension accrual due to One Bank Your Reward, as at 1 April 2015, but retain a link to final salary while remaining in employment.

Membership of the Career Average SectionActive

MembersDeferred

MembersPensioners Dependants

receiving allowances

Total

At 1 March 2019 4,409 1,191 136 14 5,750

Adjustments from previous year* 18 (58) (79) (1) (120)Adjustments* 2 (9) (8) – (15)New entrants 408 – – – 408New deferred (301) 301 – – –Deaths (2) – – – (2)Full commutations – – (6) – (6)Leavers** (108) – – – (108)Retirements (26) (18) 44 – –Transfers out (2) (9) – – (11)New allowances – – – 2 2

At 29 February 2020 4,398 1,398 87 15 5,898

Membership of the Final Salary SectionDeferred

Members (salary link)

Deferred Members

Pensioners Dependants receiving

allowances

Total

At 1 March 2019 701 3,430 5,709 1,226 11,066

Adjustments from previous year* – (11) (27) 3 (35)Adjustments* 2 (14) 4 – (8)New deferred (21) 21 – – –Deaths – – (183) (89) (272)Ceased allowances – – – (4) (4)Full commutations (1) – (3) – (4)Retirements (14) (116) 130 – –Transfers out – (54) – – (54)New allowances – – – 60 60

At 29 February 2020 667 3,256 5,630 1,196 10,749


Finances of the FundThe Fund is one of the larger funded schemes in the United Kingdom and is mature in the sense that the number of pensioners and deferred pensioners is much greater than the number of current active Members.

The size of the Fund over the last five years is shown below:

Size of Fund at end-February Assets (£ millions)2020 4,932.52019 4,369.82018 4,341.32017 4,438.02016 3,729.2 Development of the Fund during the Fund yearThe number of pensions and allowances in payment from the Final Salary Section decreased slightly from 6,958 to 6,951. In the Career Average section, the active membership decreased from 4,409 to 4,406 as this section is applicable to almost all new joiners to the Bank. There are no active Members of the Court Scheme section, with deferred membership and the number of pensioner and dependants remaining unchanged.

The accounts for the year to 29 February 2020 are presented on pages 17 to 24. During the year the total net assets of the Fund increased from £4,369.8m to £4,932.5m. The market value of assets held increased by £571.0m (2019: increased by £38.0m), which, less investment management charges of £1.6m (2019: £1.3m), and including the income from investments of £41.3m (2019: £43.4m) gave a total increase in the value of investments of £610.7m (2019: increase of £80.1m). Bank contributions in the year totalled £98.8m (2019: £96.5m).

Benefits payable to Members decreased during the year from £108.7m to £106.8m. Details of the annual increase in pensions are given on page 27. Payments to leavers increased from £39.4m to £40.3m, relating to Members electing to transfer their pensions out of the Fund.

Report on Actuarial LiabilitiesUnder Section 224 of the Pensions Act 2004, every scheme is subject to the Statutory Funding Objective, which is to have sufficient and appropriate assets to cover its technical provisions. The technical provisions represent the present value of the benefits Members are entitled to based on pensionable service to the valuation date. This is assessed using the assumptions agreed between the Trustee Directors and the Bank and set out in the Statement of Funding Principles, which is available to Members on request.

The most recent full actuarial valuation of the Scheme was carried out as at 28 February 2017. This showed that on that date:

The value of the Technical Provisions was: £4,381 millionThe value of the assets at that date was: £4,438 million*

*Includes £1.5m AVCs secured on a Money Purchase basis.

The method and significant actuarial assumptions used to determine the technical provisions are as follows:

MethodThe actuarial method to be used in the calculation of the technical provisions is the Defined Accrued Benefit Method.

Significant actuarial assumptionsDiscount interest rate: The discount rate for calculating technical provisions is set with reference to real yields

Membership of the Court SectionActive

MembersDeferred

MembersPensioners Dependants

receiving allowances

Total

At 1 March 2019 – 2 17 6 25

Retirements – – – – –

At 29 February 2020 – 2 17 6 25



available on index-linked gilts at the valuation date derived from yield curves published by the Bank and taking into account the profile of the Fund’s expected cash flows.

Future Retail Price inflation: The assumption for the future increases has been set at 3.3% per annum.

Future Consumer Price inflation: The assumption for the future increases has been set at 2.0% per annum.

Pension increases: As per the RPI and CPI assumptions above. For deferred and pensioner CARE liabilities uncapped CPI increases are assumed and for Final Salary pensions and accruing CARE liabilities, uncapped RPI increases are assumed.

Pay increases: Under the Defined Accrued Benefit Method the rate of pay increases does not impact on the assessment of technical provisions, therefore no allowance has been made for pay increases in the technical provisions calculations.

Mortality: The mortality base table adopted is the S2PA tables from Series 2 of the SAPS tables (based on the experience of Members in Self-Administered Pension Schemes), centred in 2007. The probability of death in these tables is reduced by 9% for males and by 8% for females to reflect the higher expected life expectancy for fund Members compared to the table as a whole. These weightings were derived following a Fund-specific mortality investigation.

Improvements in mortality from 2007 are assumed to be in line with the CMI 2016 projections with a smoothing factor of 8.5 and a long-term rate of improvement of 2.25% per annum.

Results from the actuarial valuation as at 28 February 2017 as set out above, were detailed in the full report prepared by the Scheme Actuary, a copy of which is available to Members on request. A summary of the results of the actuarial valuation has been provided to Members through the annual Summary Funding Statement. Full details of the contributions payable can be found in the Schedule of Contributions, a copy of which is available to Members on request.

On the assumptions adopted, the Fund’s liabilities as at 28 February 2017 were valued at £4,381m, which when compared to the assets of the Fund of £4,438m, resulted in a small funding surplus of £57m; the funding level having therefore improved to 101% compared to the 99% disclosed in 2014.

At the valuation date, there was no requirement for the Members to contribute to the Fund. Under the Defined Accrued Benefit Method, no contribution rate is calculated in advance. Instead it is calculated each year to cover the cost of benefits accruing and any uplift to past service benefits linked to salary increases. As part of the 2017 valuation, it was agreed that the rate actually payable by the Bank would be calculated annually based on the appropriate single discount rate on the last day of February preceding the end of the Fund year and the membership at the same date. In addition, it was agreed that administration expenses, including the PPF levy, would be met directly by the Bank of England.

The next triennial actuarial valuation is due as at 29 February 2020 and this is in progress. A Summary Funding Statement will be sent to all Members when the valuation has been concluded later this year.

The Actuary’s certification of the current Schedule of Contributions, as required by Section 227 of the Pensions Act 2004, appears on page 14.

Covid-19A global pandemic was declared in March 2020, following the outbreak of a new highly infectious and potentially fatal virus, Covid-19, which originated in China in late 2019. In response to the pandemic, the Trustee has implemented a business continuity plan, updated its risk register and produced a supporting Covid-19 risk assessment framework. The documentation is being closely monitored and updated to identify any potential impact of the pandemic with regard to the administration of the Fund and to ensure that business as usual is maintained as far as possible.


The Trustee is in regular contact with the Fund’s advisers and service providers to ensure that the business continuity arrangements of these firms are robust and working effectively. It is possible that the turn-around time for some administration services might be slightly extended for a while and the Trustee has agreed with the administrators which tasks should be prioritised in the current circumstances

Anne GloverChair

29 July 2020


Actuary’s certification of Schedule of Contributions

Name of scheme Bank of England Staff Pension Fund

Adequacy of rates of contributions:

1 I certify that, in my opinion, the rates of contributions shown in this schedule of contributions are such that the statutory funding objective could have been expected on 28 February 2017 to continue to be met for the period for which the schedule is to be in force.

Adherence to statement of funding principles

2 I hereby certify that, in my opinion, this schedule of contributions is consistent with the Statement of Funding Principles prepared on 18 September 2017.

The certification of the adequacy of the rates of contributions for the purpose of securing that the statutory funding objective can be expected to be met is not a certification of their adequacy for the purpose of securing the Fund’s liabilities by the purchase of annuities, if the Fund were to be wound up.

Name: Stuart M SouthallQualification: Fellow of the Institute and Faculty of Actuaries

27 September 2017

Punter Southall Limited11 StrandLondonWC2N 5HR


OpinionWe have audited the financial statements of the Bank of England Staff Pension Fund (‘the Fund’) for the year ended 29 February 2020 which comprise the Fund Account, the Statement of Net Assets and the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion, the financial statements:

• show a true and fair view of the financial transactions of the Fund during the year ended 29 February 2020, and of the amount and disposition at that date of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the year;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and• contain the information specified in Regulation 3A of the Occupational Pension Schemes (Requirement to obtain

Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concernWe have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the Trustee’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Trustee has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Fund’s ability to continue to adopt the going concern basis of accounting for a period of at least 12 months from the date when the financial statements are authorised for issue.

Other informationThe Trustee is responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Independent Auditor’s Report to the Trustee of the Bank of England Pension Fund


Independent Auditor’s Report to the Trustee of the Bank of England Pension Fund continued

Responsibilities of trusteesAs explained more fully in the Statement of Trustee’s Responsibilities set out on page 8, the Trustee is responsible for the preparation of the financial statements, for being satisfied that they give a true and fair view, and for such internal control as the Trustee determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Trustee is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to wind up the Fund or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our reportThis report is made solely to the Fund’s Trustee, as a body, in accordance with Regulation 3 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995. Our audit work has been undertaken so that we might state to the Fund’s Trustee those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund’s Trustee as a body, for our audit work, for this report, or for the opinions we have formed.

Crowe U.K. LLPStatutory AuditorLondon

29 July 2020


Statement of Net Assets (available for benefits) as at 29 February 2020

The accompanying notes on pages 18 to 24 form an integral part of these Financial Statements.

The Financial Statements summarise the transactions of the Fund and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Fund year. The actuarial position of the Fund, which does take account of such obligations, is dealt with in the Trustee Report included in the Annual Report, and these Financial Statements should be read in conjunction with them.

The Financial Statements on pages 17 to 24 were approved by the Trustee on 29 July 2020 and signed on its behalf by:

Anne Glover Christopher Bennell Geoff WinnChair Deputy Chair Secretary

2020 2019Note £000 £000

Contributions and benefitsContributions receivable 4 98,913 96,533

98,913 96,533

Benefits payable 5 106,870 108,709 Payment to and on account of leavers 6 40,302 39,435

147,172 148,144

Net withdrawals from dealings with Members (48,259) (51,611)

Returns on investmentsChange in market value of investment 7 571,276 38,011 Investment income 8 41,2876 43,381 Investment management expenses 10 (1,567) (1,329)

Net returns on investments 610,995 80,063

Net increase in the Fund during the year 562,736 28,452

Net assets of the Fund at the beginning of the year 4,369,767 4,341,315

Net assets of the Fund at the end of the year 4,932,503 4,369,767

2020 2019Note £000 £000

Investment assetsFixed-interest securities 11 352,254 469,385 Index-linked securities 11 4,469,088 3,837,249 Pooled investment vehicles 11 1,135 1,241 AVC investments 11 1,389 1,426 Other investment balances 11 87,924 39,975

Total investments 4,911,790 4,349,276

Cash 16 12,331 11,027 Other assets 16 8,792 10,076 Current liabilities 17 (410) (612)

Net assets of the Fund at the end of the year 4,932,503 4,369,767

Bank of England Pension FundFund Account for the year ended 29 February 2020


Notes to the Financial Statements

1) Basis of preparationThe financial statements have been prepared on a going concern basis and in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, Financial Reporting Standard 102 — the Financial Reporting Standard applicable in the UK and Republic of Ireland, and the guidance set out in the Statement of Recommended Practice (Revised 2018).

2) Identification of the financial statementsThe Fund is established as a trust under English Law. The address for enquiries to the Fund is: Pension Trustee Support Unit, Bank of England, Threadneedle Street, London, EC2R 8AH.

3) Accounting policiesThe following principal accounting policies have been applied consistently in the preparation of the Financial Statements.

InvestmentsQuoted investments are valued on the basis of the bid price on the relevant exchange.

Unquoted investments are included at fair value based on valuations provided by fund managers or their third-party agents.

Accrued interest is excluded from the market value of fixed-interest securities and index-linked securities but is included in investment income receivable.

Pooled investment vehicles are valued at bid market prices at the year-end date, where available, or at net asset value.

Investment incomeIncome from fixed-interest, index-linked securities, cash and short-term deposits is accounted for on an accruals basis.

Income from any pooled investment vehicles which distribute income is accounted for on the date stocks are quoted ex-dividend/interest.

The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at any time during the year, including profits and losses realised on sales of investments and unrealised changes in market value. In the case of pooled investment vehicles which are accumulation funds, change in market value also includes income, net of irrecoverable withholding tax, which is reinvested in the Fund.

Foreign currenciesAssets and liabilities in foreign currencies are expressed in sterling at the rates of exchange ruling at the year end.

Foreign currency transactions are translated into sterling at the spot exchange rate at the date of the transaction.

Gains and losses arising on conversion or translation are dealt with as part of the change in market value of investments.

ContributionsEmployer’s contributions are paid annually at the beginning of each financial year, and are recognised based on the due date set out in the Schedule of Contributions.

Additional voluntary contributions from the Members are accounted for on an accruals basis in the month they are deducted from the payroll.

BenefitsWhere Members can choose whether to take their benefits as a full pension or a lump sum with a reduced pension, retirement benefits are accounted for on an accruals basis on the later of the date of retirement and the date the option is exercised.


Other benefits are accounted for on an accruals basis on the date of retirement, death or leaving the Fund as appropriate.

Transfer valuesTransfer values represent the capital sums paid to other pension schemes for Members who have either left the Fund or are subject to pension sharing orders. Individual transfers are accounted for when paid and pension sharing orders are accounted for based on the date of the court order.

Administration expensesAdministration expenses are paid for by the Bank of England.

Investment management expensesInvestment management expenses are accounted for on an accruals basis. Transaction costs are included in the cost of purchase and sale proceeds. Transaction costs include costs charged directly to the Fund such as fees, commissions, stamp duty and other fees.

4) Contributions receivable and transfers in 2020 2019£000 £000

From Employers

Normal 98,785 96,519 Augumentation 60 –

From Members (AVCs)Added years 13 14

98,858 96,533

Transfers in 55 –

98,913 96,533

The Bank of England pays the full contributions required to fund the benefits by March of the current financial year. In line with the Schedule of Contributions a normal contribution at the rate of 42.3% (2019: 42.9%) of pensionable earnings was paid.

Added years AVCs relate to the purchase of additional pensionable service by Members that entered into a contractual agreement prior to 11 May 2006. This agreement was withdrawn after that date. Contributions being made directly to AVC arrangements were operated in the year by Utmost Life and Pensions Limited, Standard Life Assurance Limited and The Prudential Assurance Company Limited (see also Note 14).

The Fund has not permitted transfers in from other approved schemes since 2006, apart from a special concession (from 1 April 2015 to 31 March 2016) for transferring employees from the FSA. Payments into the Legal & General supplementary plan are permitted to legacy AVC payers who ceased making AVCs to the arrangements operated by Utmost Life and Pensions Limited, Standard Life Assurance Limited and The Prudential Assurance Company Limited, and are accounted for under transfers in.


Notes to the Financial Statements continued

5) Benefits payable 2020 2019£000 £000

Pensions payable 100,269 99,440 Commutations 6,139 8,540 Payment on death of Members 265 604 Taxation where lifetime or annual allowance exceeded 197 125

106,870 108,709

6) Payments to and on account of leavers

2020 2019£000 £000

Transfers out 40,302 39,435

40,302 39,435

7) Reconciliation of investments

2019Purchases

at costSales

proceedsChange in

MV

2020Note £000 £000 £000 £000 £000

Fixed-interest securities 11 469,385 5,750 (153,319) 30,438 352,254 Index-linked securities 11 3,837,249 400,813 (309,620) 540,646 4,469,088

Pooled investment vehicles 11 1,241 – (326) 220 1,135 AVC investments 14 1,426 – (9) (28) 1,389

4,309,301 406,563 (463,274) 571,276 4,823,866

Other investment balances 15 39,975 87,924

4,349,276 571,276 4,911,790

The change in market value of investments comprises realised and unrealised gains and losses during the year. It also includes increases in separately invested AVC funds, whether arising from interest, bonuses, or change in the value of underlying investments.

Transaction costs incurred during the year amounted to £nil (2019: £nil). In addition to any transaction costs, indirect costs are incurred through the bid-offer spreads on investments within pooled investment vehicles. The amount of indirect cost is not separately provided to the Fund.

The following investments have a value representing more than 5% of the net assets of the Fund as at the year-end date:

2020 2019 £000 £000

Treasury index linked 0.125% 22/03/2068 637,841 263,376Network Rail index linked 1.375% 22/11/2037 390,514 345,431Network Rail index linked 1.125% 22/11/2047 279,159 231,533Treasury index linked 1.25% 22/11/2055 262,623 176,920

There was no stock on loan at the year end.

Some £1.1m (2019: £1.2m) representing less than 0.1% (2019: <0.1%) of net assets was invested in pooled investment vehicles, which may not be readily realisable. The entire holding was in pooled investment vehicles operated by a US registered company.


8) Investment income 2020 2019£000 £000

Fixed-interest securities

UK public sector 11,442 14,748

11,442 14,748

Index-linked securitiesUK public sector 17,384 16,868 UK corporate 11,909 11,377

29,293 28,245

Interest receivableInterest on cash deposits 551 388

551 388

Total income 41,286 43,381

9) TaxationThe Scheme is a registered Pension Scheme under Chapter 2 of Part 4 of the Finance Act 2004 and is therefore exempt from income tax and capital gains tax.

10) Investment management expenses 2020 2019£000 £000

External investment management charges 1,567 1,329

1,567 1,329

Investment management expenses for 2020 were a fixed annual fee of £1.56m (2019: £1.3m), and are paid by the Fund. The increase in investment management expenses on prior year was as a result of investment management costs being subject to VAT costs following a change to the tax regime.

11) Investments 2020 2019

Note £000 £000

Fixed-interest securities

UK public sector 352,254 469,385

Total fixed-interest 352,254 469,385

Index-linked securities UK public sector 2,982,055 2,525,119 UK corporate 1,487,033 1,312,130

Total index-linked 4,469,088 3,837,249

Pooled investment vehicles Overseas private equities 1,135 1,241

Total pooled investment vehicles 1,135 1,241

AVC investments 14 1,389 1,426 Other investment balances 15 87,924 39,975

Total investments 4,911,790 4,349,276



12) Investment fair value hierarchyThe fair value of financial instruments has been determined using the following fair value hierarchy:

Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.Level 2 Inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.Level 3 Inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

The table below shows the categorisation of the Fund’s assets:

At 29 February 2020 Level 1 Level 2 Level 3 TotalNote £000 £000 £000 £000

Fixed-interest securities 11 352,254 – – 352,254

Index-linked securities 11 2,982,055 1,487,033 – 4,469,088 Pooled investment vehicles 11 – – 1,135 1,135 AVC investments 14 – – 1,389 1,389 Other investment balances 15 84,700 3,224 – 87,924

3,419,009 1,490,257 2,524 4,911,790

At 28 February 2019 Level 1 Level 2 Level 3 TotalNote £000 £000 £000 £000

Fixed-interest securities 11 469,385 – – 469,385

Index-linked securities 11 2,525,119 1,312,130 – 3,837,249 Pooled investment vehicles 11 – – 1,241 1,241 AVC investments 14 – – 1,426 1,426 Other investment balances 15 37,000 2,975 – 39,975

3,031,504 1,315,105 2,667 4,349,276

13) Investment risksThe Trustee’s approach to risk management has been set out in the Trustee’s report (page 7). Further information on the credit and market risks the Fund is subject to are set out below:

i) Credit riskThe Fund is subject to credit risk because it directly invests in bonds, and has cash balances and invests in pooled investment vehicles. The Fund is also indirectly exposed to credit risks arising on the financial instruments held by the pooled investment vehicles.

In both the current and preceding years, these pooled investment vehicles are comprised solely of limited liability partnerships.

Credit risk arising on bonds held directly is mitigated by investing in government bonds where the credit risk is minimal, or corporate bonds which are guaranteed by the Government. The total value of UK government bonds was £3,334m (2019: £2,995m), bonds guaranteed by the UK Government of £1,462m (2019: £1,288m) and the residual of £25m (2019: £24m) held in supranational bonds.

Cash is held at the Bank of England, and totalled £87.9m at 29 February 2020 (2019: £39.9m).


ii) Currency riskThe Fund is subject to indirect currency risk because some of the Fund’s investments are held in overseas markets, via pooled investment vehicles. Furthermore, these pooled investment vehicles are subject to direct currency risk as a result of the units of these funds being denominated in US dollars. The value of these assets at 29 February 2020 was £1.1m (2019: £1.2m).

iii) Interest rate riskThe Fund is subject to interest rate risk because some of its investments are held in bonds, pooled vehicles and cash. The Fund invests the vast majority of its assets in a portfolio of UK government bonds as the changes in the value of the bonds most closely match the movements in the Fund’s liabilities. The value of investments in UK government bonds was £3,334m at 29 February 2020 (2019: £2,995m).

iv) Other price riskThe Fund is only subject to other price risk in respect of the private equity pooled investment funds which were valued at £1.1m at 29 February 2020 (2019: £1.2m).

v) Liquidity riskLiquidity risk is the risk that the fund cannot meet its regular payments because it is not able to sell assets, or not able to sell without incurring some loss. This risk is mitigated by holding most of the assets in readily saleable assets such as government bonds. There are some assets, such as Network Rail bonds, which are not as easily sold down to meet the monthly cash-flow requirements without moving the price. There are very few investments in the investment portfolio which are unsaleable or would require a lengthy period of staged disinvestment to exit.

14) AVC investments 2020 2019£000 £000

Utmost Life 27 24

Standard Life 841 810 Prudential 521 592

1,389 1,426

AVCs provide money purchase benefits and are invested separately, securing additional benefits on a money purchase basis for those Members who elected to pay additional voluntary contributions. This option was closed to new savings following the One Bank – Your Reward arrangements taking effect on 1 April 2015, with a new contract-based Supplementary Pension Plan starting from this date.

Members participating in this arrangement each receive an annual statement up to the end of February confirming the amount held in their account.

15) Other investment balances 2020 2019£000 £000

Investment income receivable 10,438 11,088

Investment cash 77,486 28,887

87,924 39,975



16) Current assets 2020 2019£000 £000

Sterling cash 12,331 11,027

Other assets 8,792 10,076

21,123 21,103

Other assets include amounts held by Equiniti Paymaster at the year-end for future pension payroll payments.

17) Current liabilities 2020 2019£000 £000

Accrued benefits 20 287

Accrued expenses 390 325

410 612

18) Related party transactionsAdministration services were provided by the Bank of England. The Pension Fund held cash amounting to £12.3m at the Bank of England at the year-end (2019: £11.0m). The third-party administrator, Equiniti Paymaster, held cash amounting to £8.8m at the Bank of England at the year-end (2019: £10.1m). The investment manager, Legal & General held cash amounting to £77.5m at the Bank of England at the year-end (2019: £28.9m).

Mr Footman stood down as Chair of the Trustee Board from 13 September 2019 and did not receive any remuneration for services provided in the year. Anne Glover, who replaced Mr Footman as Chair, receives remuneration of £5,000p.a. as Chair of the Trustee Board, as well as being a member of Court. No other Trustee Director receives any remuneration for services during the year. Trustee Directors who are Bank employees are paid by the Bank. Their costs are not recharged to the Fund.

Mr Bennell is a pensioner Member of the Fund and is in receipt of a pension from the Fund. Following the proposals from the One Bank — Your Reward review, all former Final Salary Members who previously reached their 40-years maximum accrual, were then eligible to accrue a further Career Average pension from 1 April 2015. Mr Footman and Mr Curtiss have opted out of accruing pension benefit and receive a cash payment in lieu of pension.

All other Trustee Directors are active Members who are accruing benefits in the Fund, with the exception of Ms Glover who is an independent Chair.

19) Contingent liabilities and commitmentsa) Contingent liabilitiesOther than the liability to pay future pensions and allowances, there were no contingent liabilities of the Fund at 29 February 2020 (2019: £nil).

b) CommitmentsAt the year-end there were undrawn commitments to investment funds totalling £0.2m (2019: £0.2m). This represents the total of potential capital calls from overseas private equity holdings.

20) Subsequent events While there has been an impact on investment values subsequent to the year end as a result of the Covid pandemic, it is not considered necessary to adjust the fair value of investments as reported in these financial statements.


Independent Auditor’s Statement about Contributions to the Trustee of the Bank of England Pension Fund

Statement about contributions payable under the schedule of contributionsWe have examined the summary of contributions payable to the Bank of England Staff Pension Fund, for the Fund year ended 29 February 2020 which is set out in the Trustee’s report on page 26.

In our opinion contributions for the Fund year ended 29 February 2020 as reported in the summary of contributions and payable under the schedule of contributions have in all material respects been paid at least in accordance with the schedule of contributions certified by the Fund Actuary on 27 September 2017.

Basis of opinionOur objective is to obtain sufficient evidence to give reasonable assurance that contributions reported in the attached summary of contributions have in all material respects been paid at least in accordance with the schedule of contributions. This includes an examination, on a test basis, of evidence relevant to the amounts of contributions payable to the Fund and the timing of those payments under the schedule of contributions.

Responsibilities of trusteesAs explained more fully in the Statement of Trustee’s Responsibilities, the Fund’s Trustee is responsible for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions which sets out the rates and due dates of certain contributions payable towards the Fund by or on behalf of the employer and the active Members of the Fund. The Trustee is also responsible for keeping records in respect of contributions received in respect of active Members of the Fund and for monitoring whether contributions are made to the Fund by the employer in accordance with the schedule of contributions.

Auditor’s responsibilities for the statement about contributionsIt is our responsibility to provide a Statement about Contributions paid under the schedule of contributions and to report our opinion to you.

Use of our statementThis statement is made solely to the Fund’s Trustee, as a body, in accordance with The Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 made under the Pensions Act 1995. Our work has been undertaken so that we might state to the Fund’s Trustee those matters we are required to state to them in an auditor’s statement about contributions and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund’s Trustee as a body, for our work, for this statement, or for the opinion we have formed.

Crowe U.K. LLPStatutory AuditorLondon

29 July 2020


Bank of England Pension FundSummary of Contributions payable in the year

During the year, the contributions payable to the Fund were as follows

The Bank of England paid the full contributions required to fund benefits by March of the current financial year (ie March 2019) in line with the Schedule of Contributions, dated 18 September 2017 that was in force at the start of the year, at a normal contribution rate of 42.3% (2019: 42.9%) of Members’ pensionable salaries.

Signed on behalf of the Trustee:

Anne GloverChair

29 July 2020

Employee Employer £000 £000

Required by the schedule of contributions

From employers:Normal contributions – 98,785

Augmentation contributions – 60

Other contributions payableFrom Members (AVCs):Added years 13 –

Total (as per Fund Account) 13 98,845


Bank of England Pension FundCompliance Statement (forming part of the Trustee’s Report)

The purpose of this Compliance Statement is primarily to disclose some additional information required by law but which is not considered to be of such significance to Members that it requires the more prominent disclosure afforded by inclusion in the Trustee Report.

TaxationThe Fund is a registered scheme under the Finance Act 2004. Although exempt from UK income and capital gains taxes, the Fund is unable to recover the tax credit on UK dividends.

Statement of Investment PrinciplesIn accordance with the Pensions Act 1995, the Trustee has produced a Statement of Investment Principles, which is reviewed at intervals of not more than three years. Copies are available on request from the Pension Trustee Support Unit.

Additional Voluntary Contributions (AVCs)Benefits are not linked to final salary. Members’ contributions are invested in a wide range of investments with The Prudential Assurance Company Limited, Standard Life Assurance Limited — or, in a few cases where Members decided not to participate in the bulk transfer in January 2002, with Utmost Life and Pensions Limited (formerly Equitable Life Assurance Society). Explanatory information about AVCs is available from the AskHR team in People and Culture at the Bank of England on request.

As part of the ongoing management and governance of the AVC funds, as a result of AVC Members choosing to transfer their AVCs and when funds cease to receive contributions or are fully disinvested, the Trustee Board and their advisers shall withdraw these unused funds from the AVC range. In conjunction with the OBYR proposals and the governance of AVCs, it was decided that no new contributions could be made from 1 April 2015.

Statements are sent annually to Members with remaining AVC policies in respect of their contributions and the accumulation of their funds.

Final Salary Section and Court Scheme Section pension increasesPensions and allowances in payment are reviewed by the Court of Directors of the Bank at least annually and are normally increased in line with the rise in the Retail Prices Index in the year to May. They were increased by 3.0% from 1 July 2019 in line with the rise in the Index in the year to 31 May 2019.

The increase granted to deferred pensions during the period before they are brought into payment depends upon the date on which the deferred pension was granted:

a. those granted on or after 1 March 1985 are increased at the same rate as pensions in payment. (For those granted on or after 1 January 1991, increases will not be less than are required by the Social Security Act 1990.)

b. those granted between 1 March 1974 and 28 February 1985 (both dates inclusive) are increased at the same rate as pensions in payment for the proportion of pension which results from service since 1 March 1974; and at half that rate in respect of any earlier service provided total service was ten years or more.

c. those granted prior to 1 March 1974 do not receive an increase.

Career Average Section annual revaluationPensions and allowances in payment are decided by the Court of Directors of the Bank at least annually. Pensions accrued in the Career Average Section were increased by 2.5% from 1 April 2019, in line with the rise in the Retail Prices Index in the year to 31 January 2019.

Increases to deferred benefits and pensions in payment were increased by 1.8% from 1 April 2019, in line with the rise in the Consumer Prices Index in the year to 31 January 2019.


Compliance Statement continued

Transfer valuesTransfer values for Members leaving pensionable service during the year were calculated in accordance with the Pension Schemes Act 1993 (as amended by the Pensions Act 1995). No transfer values were reduced because of underfunding.

The Rules of the Fund have always provided that deferred pensioners may transfer the value of their benefits to another approved scheme at any time before any benefits have been paid from the Fund. For Members who left on or after 1 January 1986, transfer values may also be used to purchase annuity contracts issued in accordance with Section 32 of the Finance Act 1981, or to enhance approved personal pensions. The Trustee will also consider applications from those who left before that date. The Fund has not permitted transfers from other approved schemes since 2006.

Since April 2016, the Pensions Regulator has enforced a requirement for any person wanting to transfer a defined benefit pension of over £30,000 into a defined contribution arrangement; this can only proceed if they can provide evidence of independent financial advice.

The Trustee closely monitors transfer-related activity, keeping a check on how the administrator handles transfer requests; that regulations and guidelines are adhered to and that checks and processes are in place to protect Members from pension scams.

Pensions OmbudsmanAny query connected with the Fund should be referred to the Pension Fund Secretary, who will try to resolve it as soon as possible. Members and beneficiaries of occupational pension schemes who have problems concerning their scheme that are not satisfied with information or explanation given by the administrators or the Trustee Board can consult the Pensions Ombudsman, who can be contacted at:

10 South ColonnadeCanary WharfLondonE14 4PUTelephone: 0800 917 4485Email: [email protected]: www.ombudsman.org.uk/make-a-complaint

Money and Pensions Service (MaPS)The MaPS is a service which combines pension guidance, money guidance and debt advice. If you have general requests for information or guidance concerning your pension arrangements please contact:

The Money and Pensions ServiceHolborn Centre120 HolbornLondonEC1N 2TDTelephone: 0115 965 9570Email: [email protected]: www.singlefinancialguidancebody.org.uk

Documents

Bank of England Pension Fund Report and Financial ......with an Actuarial Certificate, Independent Auditor’s Report, Financial Statements and Notes, Independent Auditor’s Statement