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Registered number: 19002028

Electricity Supply Pension Scheme

Schneider Group Annual Report & Financial Statements

for the year ended

31 March 2020

Schneider Group of the Electricity Supply Pension Scheme

Annual Report and Financial Statements for the year ended 31 March 2020

Contents

Page

Message from the Chair of the Group Trustees 1

Summary of the year 3

Report of the Group Trustees

Introduction 4

Group Trustees 4

Advisers 9

Membership statistics 10

Pension increases 10

Transfer values 10

Investment report 11

Report on actuarial liabilities 14

Changes in Scheme provisions 15

Group amendments by the company 15

Review of the operation of the ESPS 15

Dispute resolution procedure 15

Guaranteed Minimum Pension Equalisation 16

Addresses for enquiries 17

Independent Auditors’ report to the Group Trustees 18

Fund account 20

Statement of net assets available for benefits 21

Notes to the financial statements 22

Independent Auditors’ statement about contributions to the Group Trustees 35

Summary of contributions 36

Schedule of contributions 37

Actuarial certificate of schedule of contributions 41

Names and addresses of external bodies 42



Message from the Chair of the Group Trustees

Page 1

Introduction

Over the second quarter of 2019 many growth markets experienced positive gains. Equity markets continued to

perform well despite volatility slightly increasing. However, Japanese equities underperformed as the Yen

strengthened. In May, the US raised tariffs to 25% on $200 billion of Chinese goods, but during the G20 meeting in

June, the US and China agreed to resume trade talks. In the UK, news was dominated by the Conservative Party

leadership race as Theresa May resigned as Prime Minister and leader of the Conservative party. Amid Brexit-related

uncertainty and the Confederation of British Industry’s report stating that retail sales were at the weakest levels since

the financial crisis, the Bank of England (“BoE”) were less dovish than the Federal Reserve (“Fed”) and European Central

Bank. Gilt yields continued to fall over the quarter, with the 20y gilt yield falling by c.0.3%. Gilt yields are now close

to all-time lows that were reached after 2016 EU referendum. This will have resulted in the value of liabilities

increasing for many pension schemes.

In Quarter 3, Brexit and domestic political uncertainty remained heightened as Boris Johnson took over as the UK’s

new Prime Minister in late July. The UK was expected to leave the EU on the 31 October 2019. Global economic

activity has been slowing down. The UK economy shrank for the first time since 2012, while Germany was pushed to

the verge of a recession. Industrial growth in China slowed but unemployment in the US fell to a 50 year low. The US

announced plans to increase tariffs by up to 25% on some European goods. The increased levies would impose a total

of £6.1bn on exports from the EU. Emerging markets also suffered as trade tensions between the US and China

escalated. Growth markets experienced modest returns, but volatility escalated during the quarter.

In the final quarter of the year political unrest eased, with trade uncertainty fading due to optimism for a phase one

trade deal between the US and China. In the UK, a majority win for the Conservative Party in December marked Boris

Johnson’s return to Downing Street with focus remaining on the Brexit deadline which entered its new phase on 31

January 2020. Both provided relief to equity markets. Gilt yields increased and inflation expectations fell. The UK 10Y

yield rose from 0.49% to 0.82% amid a decisive election result. Economic data saw some improvement, although

remained relatively weak. In the UK, CPI fell to a 3 year low of 1.5% pa in October, falling well below the BoE 2% pa

target. Unemployment levels continued to decrease, although UK wage growth slowed compared to last quarter.

Global equities performed well, picking up from Q3 and emerging markets benefited from easing geopolitical concerns.

The first quarter 2020 was dominated by the impact of COVID-19 and the actions taken to maintain the global

economy. Global equities suffered huge losses and experienced their sharpest fall since 1987, as investors began to

understand the impact that the virus will have on businesses and economies as a whole. Unprecedented levels of

fiscal stimulus followed as a £330bn emergency package was announced to help UK businesses. Both the Fed and BoE

cut rates in an attempt to cushion the shock of the virus. The Fed cut rates further by 1.5% to within 0% - 0.25% and

BoE followed by cutting rates to 0.1%, their lowest ever value. As a result, gilt yields were volatile but overall yields

and inflation expectations fell from the previous quarter, with the UK 10Y yield falling by 0.45%.

Over the year to 31 March 2020 the Company continued to pay contributions to the Group as agreed following the

actuarial valuation as at 31 March 2016. These contributions were set at a level expected to meet the costs of benefits

accruing to members. The value of the Group's assets increased mainly due to net returns on investments.



Message from the Chair of the Group Trustees

Page 2

The Group Trustees have assessed, and continue to monitor, the consequences of the COVID-19 pandemic for the

Group. The Group Trustees and their advisers have adapted to remote working and have been able to continue to

manage the Group effectively, considering the following areas in particular:

• The financial position of the sponsoring employer and the payment of contributions due;

• The administration and payment of benefits by the Group’s Administrator, RPMI, including their business

continuity planning, operational resilience, cyber/IT security measures and the maintenance of their

control environment;

• The effect on the Group Trustees’ investment strategy to meet the Group’s long term objective, the value

of the Group’s assets and the ability to provide sufficient cashflow to support pension and other benefit

payments.

The latest formal actuarial valuation of the Group has been carried out as at 31 March 2019.

For the Group year ended 31 March 2020, the financial statements have been prepared in accordance with the

Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor)

Regulations 1996, Financial Reporting Standard (FRS) 102 - The Financial Reporting Standard applicable in the UK and

Republic of Ireland issued by the Financial Reporting Council (“FRS 102”) and the guidance set out in the Statement of

Recommended Practice “Financial Reports of Pension Schemes” (Revised June 2018) (“the SORP”).

Original signed by

Original Document signed By the Chair of Trustees 7th Aug 20

Chair of the Schneider Group Trustees

7th August 2020



Summary of the Year

Page 3

What came in £000

Employer contributions 575

Employee contributions 9

Total 584

What went out £000

Benefits 700

Transfers to other plans 504

Net return on investments 2,223

Total 3,427

Value of Group assets over the last five years as at 31 March £000

2020 25,259

2019 28,102

2018 27,966

2017 28,226

2016 23,048

Summary of membership statistics as at 31 March 2020

Contributors 3

Pensioners 46

Dependants 4

Deferred Pensioners 33

Total 86

Statement of Group assets spread by category of investment

Asset type % of Group assets

Equities held within pooled investment vehicles 57.6

Bonds held within pooled investment vehicles 41.4

Cash/Other 1.0

Total 100.0




Page 4

Introduction

This Group Annual Report & Financial Statements is produced by the Group Trustees of the Schneider Group (the

"Group") of the Electricity Supply Pension Scheme (“ESPS”) (the “Scheme”). The Scheme is an industry-wide pension

scheme in which the Participating Employers are companies formed upon the privatisation of the electricity industry

in 1990 or their successors.

The Scheme has 26 separate actuarially independent sections (known as “Groups”) in respect of the companies

participating in the Scheme as Principal Employers and each Group has its own assets to fund the benefits of its

members. The Schneider Group of the ESPS is one of these. Information relating to the Scheme as a whole can be

found in the Scheme Annual Report & Financial Statements.

The Scheme is established under irrevocable trusts and its provisions are set out in the Clauses and Rules contained in

the Scheme document. Membership of the Group has been closed to new employees since 2004 for which alternative

arrangements have been put in place. The Scheme is a registered pension scheme under the Finance Act 2004 and

was primarily contracted out of the State Second Pension until 5 April 2016.

In the case of Schneider Group, only Defined Benefits arrangements apply.

The Principal Employer is Schneider Electric Limited.

The Group Financial Statements on pages 20 to 34 have been prepared and audited so as to comply with Regulations

made under Section 41 (1) of the Pensions Act 1995.

Trustee structure

The Group is administered by a body of trustees known as Group Trustees. The Group Trustees structure of the

Schneider Group provides for a total of 4 Group Trustees, 2 appointed by the Employer and 2 elected by members.

There is also a central Scheme Trustee, Electricity Pensions Trustee Limited (“EPTL”) which is a trust corporation and

consists of a Council and a smaller Board of Directors.

Group Trustees

Names of Group Trustees

Mandi Nicol Appointed Group Trustee and Chair

Trevor Lambeth Appointed Group Trustee and Deputy Chair

Nicola Brady 1 Elected Group Trustee

David Hoskins 2 Elected Group Trustee

Note:

1. Active member of the Group

2. In receipt of pension from the Group




Page 5

Appointment/Election of Group Trustees

The two Appointed Group Trustees are appointed by, and can be removed by, Schneider Electric Limited.

The Elected Group Trustees are elected by contributing members and pensioner members of the Group. In addition

to changes that take place at an election, an Elected Group Trustee ceases to be a Group Trustee if he/she resigns,

ceases to be a contributing member or pensioner of the Group, or is removed from office by a majority of the other

Group Trustees. A casual vacancy for an Elected Group Trustee can be filled by a person nominated by the remaining

Elected Group Trustees.

Elected Group Trustees normally serve for a term of 4 years.

Group constituencies

The Group does not use constituencies (i.e. sections, divisions or classes of member within the Group) in electing

trustees; any candidate standing for election is eligible to receive a vote from any member.

Once having taken up office, all Group Trustees - both Elected and Appointed - act on behalf of and are accountable

to all members of the Group.

Meetings of the Group Trustees during the year

During the year to 31 March 2020 the Group Trustees held meetings on the following dates:

2 July 2019

5 November 2019

10 March 2020

Business of meetings of Group Trustees

At their meetings the Group Trustees dealt with matters relating to members’ benefits, the actuarial valuation as at

31 March 2019 and the investment of the Group Assets. They also received periodic reports from their investment

consultant. The Group Trustees communicate with members by way of a newsletter which is issued to all members

on an annual basis.

Voting at meetings of Group Trustees

In the event of an issue being put to a vote at a meeting, each Appointed Group Trustee has one vote and each Elected

Group Trustee has one vote.

In the event of an equality of votes the Chair has the discretion to exercise an additional casting vote to resolve the

issue concerned. In the year under review there was no occasion on which the Chair used this casting vote.




Page 6

Investment Governance Group principles

The Group Trustees have reviewed their procedure against the best practice principles set by the Investment

Governance Group (“IGG”). The IGG is a joint government-industry group sponsored by the HM Treasury and the

Department for Work and Pensions and consists of a group of senior figures representing all parts of the private

workplace pension environment. The IGG was set up to encourage industry ownership and promotion of the Myners’

Principles.

The primary purpose of the IGG Principles is to ensure that trustees have the right skill set and decision-making

structures and also that they have clear objectives and an appropriate and well-documented strategy in place for

achieving these objectives.

The Group Trustees regularly review their training needs and skills to ensure effective decision-making. Where

appropriate, they take independent expert advice.

Group Trustees’ statement on investments

Under the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, Group Trustees

must provide a statement of the Group Trustees’ policy (if any) in relation to investments and the extent to which

social, environmental and ethical considerations are taken into account in the selection, retention and realisation of

investments.

For direct portfolio investments the Group Trustees recognise that social, environmental and ethical consideration are

among the factors which investment managers will take into account, where relevant, when selecting investments for

purchase, retention or sale. The managers have produced statements setting out their policy in this regards. The

managers have been delegated by the Group Trustees to act accordingly.

For pooled investment portfolios, the selection of investments is dependent entirely upon the constituents of the

relevant indices.

Statement of Group Trustees’ Responsibilities

Group Trustees’ responsibilities in respect of the financial statements

The financial statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting

Practice, including the Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”), are the

responsibility of the Group Trustees. Pension scheme regulations require, and the Group Trustees are responsible for

ensuring, that those financial statements:

• show a true and fair view of the financial transactions of the Group during the Group year and of the amount

and disposition at the end of the Group year of its assets and liabilities, other than liabilities to pay pensions and

benefits after the end of the Group 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.




Page 7

In discharging these responsibilities, the Group Trustees are responsible for selecting suitable accounting policies, to

be applied consistently, making any estimates and judgements on a prudent and reasonable basis, and for ensuring

that the financial statements are prepared on a going concern basis unless it is inappropriate to presume that the

Group will continue as a going concern.

The Group Trustees are also responsible for making available certain other information about the Group in the form

of an annual report.

The Group Trustees also have a general responsibility for ensuring that accounting records are kept and for taking such

steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other

irregularities, including the maintenance of an appropriate system of internal control.

Group Trustees’ responsibilities in respect of contributions

The Group Trustees are responsible under pensions legislation for preparing, and from time to time reviewing and if

necessary revising, a schedule of contributions showing the rates of contributions payable to the Group by or on behalf

of employers and the active members of the Group and the dates on or before which such contributions are to be

paid.

The Group Trustees are also responsible for keeping records in respect of contributions received in respect of any

active member of the Group and for adopting risk-based processes to monitor whether contributions that fall due to

be paid are paid into the Group in accordance with the schedule of contributions.

Where breaches of the schedule occur, the Group Trustees are required by the Pensions Acts 1995 and 2004 to

consider making reports to the Pensions Regulator and to members.

Additional Group Trustees’ responsibilities

The structure of the Scheme means that certain matters are dealt with by Group Trustees and certain matters are

dealt with by the Scheme Trustee.

The main additional responsibilities of the Group Trustees are:

• to determine an investment strategy for Group assets;

• to ensure appropriate management of the Group assets;

• to arrange for regular actuarial valuations of the Group to be carried out in accordance with the funding

principles agreed with the Employers;

• to prepare and agree with the Employers a Statement of Funding Principles which includes the actuarial

assumptions used to assess the Group’s liabilities;

• to prepare and agree a recovery plan with the Employers for making good any shortfall in assets against liabilities

identified in periodic actuarial valuations; and

• to make available annual funding updates on the financial position of the Group available to members.

The main responsibilities of EPTL are:

• to ensure the safe custody and administrative control of assets;

• to produce the Scheme Report & Financial Statements on an annual basis; and

• to ensure proper investment management of Group assets invested in the Unitised Fund.




Page 8

Scheme Arrangements for appointing the Board of Directors

Under the Scheme constitution, each Group currently appoints two individuals to be Councillors of the EPTL Council;

one Councillor is chosen by the Elected Group Trustees, and one by the Principal Employer.

As at 31 March 2020 David Hoskins was the Elected Councillor from Schneider Group but the Principal Employer had

not appointed a Councillor.

The Council is responsible for the appointment of a smaller Board of eight Directors, selected from their number under

the following criteria:

(a) Four Directors must be Councillors chosen by Elected Group Trustees; and

(b) Four Directors must be Councillors chosen by Principal Employers.

The Board also has an Independent Chair, Capital Cranfield Trustees Limited who are normally represented by Joanna

Matthews.

The Council has also chosen a panel of four Reserves who may attend Board meetings as observers but they do not

have any voting rights at these meetings. Two are chosen by the Elected Group Trustees and two by the Principal

Employers.

As at 31 March 2020 there were no Schneider Group Councillors on the Board or acting as a Reserve.




Page 9

Advisers

The following appointments were in place during the financial year:

Group Actuaries

Thomas Laws FIA of XPS Pensions Group (appointed 6

September 2019)

Shelley Jeffery FIA of XPS Pensions Group (resigned 10

September 2019)

Carries out valuations and other funding updates of

the Group as required by the Scheme Rules and

Statute, provides all tables and factors for the

application of Scheme Rules and options, and

advises on all matters relating to pension funding.

Independent Group Auditor

PricewaterhouseCoopers LLP

Reports on the audit of the Group Financial

Statements.

Scheme Custodian

The Bank of New York Mellon

Maintains safe custody of the Scheme’s assets.

Investment Consultant

XPS Pensions Group

Advises the Group Trustees on all investment

matters including the Statement of Investment

Principles (SIP).

Administrator

RPMI

Maintain member records and ensures that the

Group operates effectively.

Legal Adviser

Field Fisher Waterhouse LLP

Advises on legislative requirements and application

of the provisions of the Group in particular

circumstances.

Group Appointed Fund Managers

Legal & General Assurance (Pensions Management) Limited

Ruffer LLP (until July 2019)

Manages the Schneider Group investments in

accord with the SIP.

Additional Voluntary Contributions (AVC) Provider

Prudential Assurance Society Limited

Banker

HSBC Bank plc




Page 10

Change of Group Actuary

Shelley Jeffery resigned from the position of Group Actuary with effect from 10 September 2019 and wrote to the

Group Trustees on 9 September to confirm that “I know of no circumstance connected with my resignation as Scheme

Actuary to the Group which, in my opinion, significantly affects the interests of the members or prospective members

of, or beneficiaries under, the Group.”

Membership statistics

Contributors Pensioners Dependants

Deferred

Pensioners Total

As at 1 April 2019 3 45 4 35 87

Retirements - 1 - (1) -

Transfers out - - - (1) (1)

As at 31 March 2020 3 46 4 33 86

Pension increases

The Rules of the Scheme applicable to the Group provide for all pensions in payment, children's allowances/pensions

and deferred pensions to be increased on an annual basis on 1 April each year in accordance with the rise in the Retail

Prices Index (RPI) in the 12 months ended on the preceding 30 September or 31 December (dependant on the category

of membership). If the RPI increase is greater than 5% then Schneider Electric Limited has the discretion to limit the

pension increase to a lower figure subject to a minimum of 5%.

For members within the Manweb and Norweb categories the September 2019 RPI figure was 2.4%. For Scottish Power

members the December 2019 RPI figure was 2.2%. A proportionate increase was applied to pensions which came into

payment between 2 April 2019 and 1 March 2020.

Pension increases over the previous five years were:

Manweb/Norweb Scottish Power

1 April 2019 3.3% 2.7%

1 April 2018 3.9% 4.1%

1 April 2017 2.0% 2.5%

1 April 2016 0.8% 1.2%

1 April 2015 2.3% 1.6%

Transfer values

Cash equivalents paid during the Group year with respect to transfers have been calculated and verified in the manner

prescribed by the Pension Schemes Act 1993 and do not include discretionary benefits.




Page 11

Investment report

Investment arrangements

The Group Trustees are responsible for making suitable arrangements for the investment of the assets of the Group

and for monitoring the investment performance of those assets.

The investment strategy set by the Group Trustees takes account of the Group’s current and anticipated future pension

liability profile.

The Group’s assets are held with Legal & General Assurance (Pension Management) Limited (“L&G”).

The Group Trustees specify the investment objectives for the Group’s assets, including performance objectives.

Investment reports are received at quarterly intervals and the Trustee’s investment advisors attend each meeting of

the Group Trustees to discuss investment strategy and the funds in which the Group invests..

After considering a paper from the investment consultants, the Group Trustees confirmed in June 2019 their decision

to disinvest from Ruffer and to reinvest the disinvestment proceeds in the equity-based portfolio managed by L&G.

Statement of Investment Principles ("SIP")

The Group Trustees have produced a Statement of Investment Principles (SIP) in accordance with Section 35 of the

Pensions Act 1995. In preparing the SIP the Group Trustees took professional advice from their investment consultant

XPS Investment and consulted with the Company.

The SIP was signed in September 2019 and reflected changes to the investment strategy which were implemented in

August 2019 as well as addressing how the Group takes account of financially material considerations, including (but

not limited to) those arising from environmental, social and governance (“ESG”) considerations, including climate

change.

The SIP covers the Group Trustees’ policy on the following matters:

(a) compliance with regulatory requirements;

(b) division of responsibilities;

(c) investment policy and objectives;

(d) risk and diversification;

(e) investment manager selection, fees and monitoring

(f) voting rights;

(g) social, environmental and ethical investment considerations; and

(h) information on AVC facilities

The Group Trustees are not aware of and have not been informed by the fund managers of any departures from the

SIP during the year. A copy of the SIP can be obtained by writing to the Group Administrator, whose address and

telephone number appears on page 17.




Page 12

Investment performance

The Group Trustees determine the broad investment policy to be adopted by the Schneider Group. The Group

Trustees’ objective is to endeavour to target a funding position such that they can meet their obligations to the

beneficiaries both in the short and long term. In addition the Group Trustees wish to maintain a stable contribution

rate and maintain the Company’s support of the Group. The investment returns to 31 March 2020 are shown below.

Name of Manager % Distribution % Return For Year

L&G

Fund

UK Equity 26.7 (18.4)

North American Equity 11.0

(2.8)

North American Equity – GBP Hedged (9.6)

Europe (ex UK) Equity 8.8

(8.0)

Europe (ex UK) Equity – GBP Hedged (10.6)

Japan Equity 4.5

(2.1)

Japan Equity – GBP Hedged (9.6)

Asia Pacific (ex Japan) Dev Equity Index 3.8

(17.6)

Asia Pacific (ex Japan) Dev Equity Index – GBP Hedged (16.1)

Global Emerging Markets 3.4 (14.7)

Over 5 yr Index Linked Gilts 11.9 2.4

Over 15 yr Index Linked Gilts 29.9 2.0

The performance for the Group as a whole to 31 March 2020 is shown below:

1 year to 31 March 2020 3 years to 31 March 2020

Return (%) Benchmark (%) Return (%) Benchmark (%)

Investment performance (8.2) (8.2) (0.2) 0.1

The Group Trustees employ XPS Pensions Group as their investment adviser to provide independent assessments and

help them review the Group’s investment performance.

Post year end, the performance of the Group’s investments has improved, partially recovering, largely due to equities

rebounding strongly over Q2. There were no trading restrictions nor any impact on the certainty over valuations

received from the investment managers as at 31 March 2020 as a result of the COVID-19 pandemic.

AVC investments

Although the Group Trustees hold assets invested as Additional Voluntary Contribution (AVC) investments, during the

year no AVCs were paid by any of the Group’s members. AVCs paid by members in previous years were within overall

limits set by HM Revenue & Customs (HMRC) and are invested on a money purchase basis to provide additional

pension benefits for the members concerned.

The Group Trustees hold the AVC investments separately from the main fund in the form of individual building society

accounts and insurance policies. Each member who holds AVC investments receives an annual statement at the year-

end confirming the amount held in his/her account and the movements in the value of the AVC investment over the

year.




Page 13

Custody

The assets of the Group were subject to the overall custody and administrative control of EPTL and are held by the

Scheme-wide custodians appointed by EPTL to safeguard the assets.

The Bank of New York Mellon is the custodian in relation to securities. Where certificates are available in relation to

such securities, they are held by The Bank of New York Mellon and identified as investments of the Scheme. Where

certificates are not available, but records are held in computer based systems, the relevant accounts record the

Scheme’s ownership.

The Group Trustees are responsible for instructing BNY Mellon on the day to day management of the assets of their

Group.

For Group-specific funds, money at call and short notice is placed in accordance with the provisions of Investment

Management Agreements negotiated between Group Trustees and Group-specific fund managers. Additionally, limits

are in place to minimise exposure to any one bank. In each case the Scheme is identified as the lender.

All cash is held in bank accounts in the name of the Scheme, or in a fund manager’s institutional cash fund, commonly

called a cash pool. This type of investment allows cash to be invested across a broad range of institutions thereby

reducing risk and exposure.




Page 14

Report on Actuarial Liabilities

Under Section 222 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 at the valuation date. This is assessed using the assumptions agreed

between the Group Trustees and the Employers and set out in the Statement of Funding Principles, which is available

to Group members on request.

Under the current statutory funding regime each Group of the Electricity Supply Pension Scheme is treated as a

pension scheme in its own right. Under this regime an actuarial valuation of the Schneider Group of the Electricity

Supply Pension Scheme was carried out by the Group Actuary, Thomas Laws of XPS Pensions Group as at 31 March

2019. As part of this valuation the Group Trustees prepared and agreed with the Employer their current Statement of

Funding Principles. The Pensions Regulator has issued a Code of Practice for the funding regime and reviews valuations

against this Code.

The actuarial valuation as at 31 March 2019 showed that on that date, the value of the Technical Provision liabilities

and assets were £34.14 million and £28.10 million respectively, a funding level of 82.3%. The main assumptions

underlying the valuation calculation, which has been undertaken using the Projected Unit Method as at 31 March

2019, were:

Pre-retirement discount rate 3.35%

Post-retirement discount rate 1.85%

Pay increases 3.25%

Retail Price Index inflation 3.25%

Consumer Price Index inflation 2.25%

Rate of increases to pensions in payment in excess of GMPs 3.15%

Rate of increases to post-88 GMPs in payment 2.00%

Rate of revaluation of deferred pensions 3.25%

Mortality before and after retirement SAPS S3PA CMI 2018 with a

1.5% long term trend

As the 31 March 2019 valuation disclosed a shortfall of £6.04 million between the Group’s assets and liabilities the

Group Trustees agreed with the Employer a Recovery Plan for eliminating the shortfall. Details of the agreed

contributions are reflected in a Schedule of Contributions. A copy of the current Schedule of Contributions is included

on pages 37 to 41. The Recovery Plan aims to remove the deficit by 30 June 2025 (i.e. 6 years 3 months after the

valuation date) by continuing to pay £520,000 per annum in equal monthly instalments.




Page 15

Changes in Scheme Provisions

Scheme wide amendments by the Scheme Co-ordinator, Electricity Pensions Limited (EPL)

EPL may amend the provisions of the Scheme with the unanimous consent of all of the participating Principal

Employers. During the year ended 31 March 2020 the following Scheme-wide amendment was made:

• Deed of Amendment dated 21 January 2020 enhanced provisions concerning the insolvency of a Principal

Employer.

Group amendments by the Company

The Principal Employer, Schneider Electric Limited, may make amendments to the provisions of the Scheme as they

apply to the Group. The Company did not make any amendments during the year.

Review of the operation of the ESPS

• Reviews of the Scheme’s advisers including the General Legal Adviser and the Scheme Auditor took place;

• The Scheme complied with its AML obligations and will continue to monitor this together with the Scheme’s

Tax Adviser;

• Groups took over the responsibility for their individual AVC and DC arrangements; and

• Work on investment matters including Brexit, ESG and investment disclosures continued as well as

developments to the appointment process of investment managers.

Dispute resolution procedure

Pension legislation requires pension schemes to have procedures for the trustees to resolve disputes arising from the

running of their scheme.

The Dispute Resolution Procedure for the Group is a two-stage process. In the first instance a complaint from a

member (including a pensioner, dependant, and deferred member) or prospective member must be addressed to the

Group Administrator. In normal circumstances a response will be made within two months. If dissatisfied with the

response, the complainant is entitled to refer the complaint to the Group Trustees within six months of receiving the

response from the Group Administrator. The Group Trustees will reply directly, again where possible within two

months.

This procedure has been introduced to comply with legislative requirements and does not preclude any member from

raising any queries regarding the Group informally at any time.

The details for contacting the Group Administrator are shown on page 17.




Page 16

Guaranteed Minimum Pension (“GMP”) Equalisation

In October 2018, the High Court determined that benefits provided to members who had contracted out of their

pension scheme must be recalculated to reflect the equalisation of state pension ages between May 1990 and April

1997 for both men and women. This is known as “GMP Equalisation”. Under the ruling, schemes are required to

backdate benefit adjustments in relation to GMP Equalisation and provide interest on the backdated amounts.

The Group has undertaken a process of assessing the overall impact of GMP Equalisation, and plans to adjust members’

benefits to reflect the correct position and communicate this to members. The Group Trustees have obtained an initial

estimate of the backdated benefits and interest which relate to equalisation of Group benefits for the period between

May 1990 and April 1997. Based on an initial assessment of the likely backdated amounts and related interest the

Group Trustees do not expect these to be material to the financial statements and therefore have not included a

liability in respect of these matters in these financial statements. They will be accounted for in the year they are

determined.




Page 17

Addresses for enquiries

The Group Administrator is Miss S Rayworth, who can be contacted at the address and telephone number given below:

Miss S Rayworth

ESPS Group Administrator

c/o XPS Pensions Group

11 Strand

London

WC2N 5HR

Telephone: 020 3905 4968

Email: [email protected]

If members wish to make enquiries about their personal situation, obtain a Nomination of Beneficiary form, advise the

Administrator as to a change in their circumstances or enquire as to their entitlement to benefits, pensions statements

or pension payments, they should, in the first instance, contact Mr D White at RPMI who is based at:

RPMI

2 Rye Hill Office Park

Birmingham Road

Coventry

CV5 9AB

Telephone: 02476 472 891


Approved by the Group Trustees and signed on their behalf on .................................

Signature

Original signed by the Chair of Trustees




Independent Auditors’ Report to the Group Trustees of the Schneider Group

of the Electricity Supply Pension Scheme

Page 18

Report on the audit of the Financial Statements

Opinion

In our opinion, Schneider Group of the Electricity Supply Pension Scheme’s Financial Statements:

• show a true and fair view of the financial transactions of the Group during the year ended 31 March 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 (United Kingdom Accounting Standards comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); 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.

We have audited the Financial Statements, included in the Annual Report and Financial Statements, which comprise: the Statement of Net Assets Available for Benefits as at 31 March 2020; the Fund Account for the year then ended; and the notes to the Financial Statements, which include a description of the significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern

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

- the Group Trustees’ use of the going concern basis of accounting in the preparation of the Financial Statements is not appropriate; or

- the Group Trustees have not disclosed in the Financial Statements any identified material uncertainties that may cast significant doubt about the Group’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the Financial Statements are authorised for issue.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.

Reporting on other information

The other information comprises all the information in the Annual Report and Financial Statements other than the Financial Statements, our auditors’ report thereon and our auditors’ statement about contributions. The Group Trustees are responsible for the other information. Our opinion on the Financial Statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance 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 an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of 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 based on these responsibilities.



Independent Auditors’ Report to the Group Trustees of the Schneider Group

of the Electricity Supply Pension Scheme

Page 19

Responsibilities for the Financial Statements and the audit

Responsibilities of the Group Trustees for the Financial Statements

As explained more fully in the Statement of Group Trustees’ responsibilities, the Group Trustees are responsible for ensuring that the Financial Statements are prepared in accordance with the applicable framework and for being satisfied that they show a true and fair view. The Group Trustees are also responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In the preparation of the Financial Statements, the Group Trustees are responsible for assessing the Group’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 Group Trustees either intend to wind up the Group, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the Financial Statements

Our 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 auditors’ 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 the 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 FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinion, has been prepared for and only for the Group Trustees as a body in accordance with section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Original Signed by PricewaterhouseCoopers LLP 7th August 2020

PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds Date



Fund Account for the year ended 31 March 2020

Page 20

Note 2020 2019

£000 £000

Additions from dealings with members

Employer contributions 4 575 592

Employee contributions 4 9 10

584 602

Withdrawals from dealings with members

Benefits paid or payable 5 (700) (749)

Payments to and on account of leavers 6 (504) (1,057)

(1,204) (1,806)

Net withdrawals from dealings with members (620) (1,204)

Returns on investments

Investment income 7 10 41

Change in market value of investments 8 (2,204) 1,326

Investment management expenses 9 (29) (27)

Net returns on investments (2,223) 1,340

Net (decrease) / increase in the fund (2,843) 136

Opening net assets 28,102 27,966

Closing net assets 25,259 28,102

The notes on pages 22 to 34 form part of these Financial Statements.



Statement of Net Assets Available for Benefits as at 31 March 2020

Page 21

Note 2020 2019

£000 £000

Investment assets

Equities 8 - 1,212

Bonds 8 - 1,323

Pooled investment vehicles 10 25,012 25,273

Derivatives 11 - 33

AVC investments 12 1 1

Cash 13 - 203

Other investment balances 13 3 13

25,016 28,058

Investment liabilities

Derivatives 11 - (1)

Other investment balances 13 (7) (50)

(7) (51)

Total net investments 25,009 28,007

Current assets 18 250 95

Total net assets available for benefits 25,259 28,102

The Financial Statements summarise the transactions of the Group and deal with the net assets available for benefits

at the disposal of the Group Trustees. They do not take account of obligations to pay pensions and benefits, which

fall due after the end of the Group year. The actuarial position of the Group, which does take account of such

obligations, is dealt with in the report on Actuarial Liabilities on page 14 of this Annual Report and these Financial

Statements should be read in conjunction with this report.

The Notes on pages 22 to 34 form part of these Financial Statements.

These Financial Statements were approved by the Group Trustees and signed on their behalf on .................................

Signature

Original Signed by Chair of Trustees




Notes to the financial statements

Page 22

1. Basis of preparation of the financial statements

The individual financial statements of Schneider Group of the Electricity Supply Pension Scheme have been prepared

in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement

from the Auditor) Regulations 1996, Financial Reporting Standard (FRS) 102 - The Financial Reporting Standard

applicable in the UK and Republic of Ireland issued by the Financial Reporting Council (“FRS 102”) and the guidance

set out in the Statement of Recommended Practice “Financial Reports of Pension Schemes” (Revised June 2018) (“the

SORP”).

2. Identification of the financial statements

The Schneider Group of the Electricity Supply Pension Scheme is established as a trust under English law. The ESPS is

a registered pension scheme under Chapter 2, Part 4 of the Finance Act 2004. This means that contributions by the

Employers are normally eligible for tax relief, and income and capital gains earned by the Group are generally tax

exempt. The address for the Group Administrator is Miss S Rayworth, ESPS Group Administrator, c/o XPS Pensions

Group , 11 Strand, London, WC2N 5HR. If members wish to make enquiries about their personal situation, obtain a

Nomination of Beneficiary form, advise the Administrator as to a change in their circumstances or enquire as to their

entitlement to benefits, pensions statements or pension payments, they should, in the first instance, contact Mr D

White at RPMI who is based at RPMI, 2 Rye Hill Office Park, Birmingham Road, Coventry, CV5 9AB.

3. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Financial Statements are set out below. These

policies have been consistently applied to all years presented, unless otherwise stated.

Currency

The Group’s functional currency and presentational currency is pounds sterling (GBP).

Assets and liabilities in foreign currency 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.

Contributions

Normal contributions, both from employees and employers, are generally accounted for on an accruals basis in the

payroll period to which they relate. In the case of employee contributions this is when deducted from pay.

Employers’ deficit funding contributions are accounted for on the due dates set out in the Schedule of Contributions,

or on receipt if earlier, with the agreement of the Employer and Group Trustees.

Employers’ Early Retirement contributions are accounted for in accordance with the agreement under which they are

paid, or in the absence of such agreement, when received.




Page 23

Transfers to and from the Group

Transfer values represent the capital sums either receivable in respect of members from other pension plans of

previous employers or payable to the pension plans of new employers for members who have left the Group. They

are accounted for on an accruals basis on the date the trustees of the receiving plan accept the liability. In the case of

individual transfers, this is normally when payment of the transfer value is made.

Benefits and payments to and on account of leavers

Pensions in payment are accounted for in the period to which they relate.

Where members can choose whether to take their benefits as a full pension or as a lump sum with reduced pension,

retirement benefits are accounted for on an accruals basis on the later date of retirement and the date the option is

exercised.

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

accounted for when the Group Trustees are notified of the members’ decision to leave the Group.

Administrative and other expenses

Administrative expenses are accounted for on an accruals basis.

Investment income and expenditure

Income from equities, and any pooled investment vehicles which distribute income, is accounted for on an accruals

basis on the date stocks are quoted ex-dividend, or in the case of unquoted instruments, when the dividend is declared.

Income from bonds is accounted for on an accruals basis and includes income bought and sold on purchases and sales

of bonds. Other interest on cash and short term deposits and income from other investments are accounted for on

an accruals basis.

Investment income includes withholding taxes. Withholding taxes is accrued on the same basis as investment income.

Where withholding tax is not recoverable, this is shown as a separate expense within investment income.

The change in market value of investments during the year comprises all increases and decreases in 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, where

income is reinvested within the fund without issue of further units, change in market value also includes such income.

Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged

directly to the Group such as fees, commissions, stamp duty and other fees. Other investment management expenses

are accounted for on an accruals basis and shown separately within investment returns.




Page 24

Valuation and classification of investments

Investment assets and liabilities are included in the Financial Statements at fair value. Where separate bid and offer

prices are available, the bid price is used for investment assets and the offer price for investment liabilities. Otherwise,

the closing single price, single dealing price or most recent transaction price is used.

Where quoted and other unit prices are not available, the Group Trustees adopt valuation techniques appropriate to

the class of investment. Details of the valuation techniques and principal assumptions are given in the Notes to the

Financial Statements where used.

The methods of determining fair value for the principal classes of investments are:

• Equities, bonds and certain pooled investment vehicles, which are traded on an active market, are included at

the quoted price, which is normally the bid price;

• Unitised pooled investment vehicles, which are not traded on an active market, but where the manager is able

to demonstrate that they are priced daily, weekly or at each month end, and are actually traded on substantially

all pricing days are included at the last price provided by the manager at or before the year end;

• The value of other equities, bonds and pooled investment vehicles which are unquoted or not actively traded

on a quoted market is estimated by the Group Trustees. Where the value of the pooled investment vehicle is

primarily driven by fair value of its underlying assets, the net asset value advised by the fund manager is normally

considered a suitable approximation to fair value unless there are restrictions or other factors which prevent

realisation at that value, in which case adjustments are made;

• Forward foreign exchange contracts (FFX) are valued at the gain or loss that would arise from closing out the

contract at the reporting date by entering into an equal and opposite contract at that date;

Accrued interest is excluded from the market value of bonds, but is included in investment income receivable.

4. Contributions

2020 2019

£000 £000

Employers:

Normal 55 62

Deficit funding 520 520

Early retirement - 10

Employees:

Normal 9 10

584 602

Deficit funding contributions of £43,333 per month were payable by the Employer to the Group in accordance with

the schedule of contributions certified by the Group Actuary on 30 June 2017, and will continue to be paid until 30

June 2025 under the schedule of contributions certified by the Group Actuary on 27 April 2020.




Page 25

5. Benefits paid or payable

2020 2019

£000 £000

Pensions 652 618

Commutations of pensions and lump sum retirement benefits 48 131

700 749

In October 2018, the High Court determined that benefits provided to members who had contracted out of their

pension scheme must be recalculated to reflect the equalisation of state pension ages between May 1990 and April

1997 for both men and women. This is known as “GMP Equalisation”. Under the ruling, schemes are required to

backdate benefit adjustments in relation to GMP Equalisation and provide interest on the backdated amounts.

The Group has undertaken a process of assessing the overall impact of GMP Equalisation, and plans to adjust members’

benefits to reflect the correct position and communicate this to members. The Group Trustees have obtained an initial

estimate of the backdated benefits and interest which relate to equalisation of Group benefits for the period between

May 1990 and April 1997. Based on an initial assessment of the likely backdated amounts and related interest the

Group Trustees do not expect these to be material to the financial statements and therefore have not included a

liability in respect of these matters in these financial statements. They will be accounted for in the year they are

determined.

6. Payments to and on account of leavers

2020 2019

£000 £000

Individual transfer values paid to other pension schemes 504 1,057

7. Investment income

2020 2019

£000 £000

Dividends from equities 6 32

Income from bonds 3 7

Interest on cash deposits 1 2

10 41




Page 26

8. Reconciliation of net investments

Value at

01.04.19

Purchases

and

derivative

payments

Sales

proceeds and

derivative

receipts

Change in

market value

Value at

31.03.20

£000 £000 £000 £000 £000

Equities 1,212 456 (1,706) 38 -

Bonds 1,323 72 (1,445) 50 -

Pooled investment vehicles 25,273 2,669 (693) (2,237) 25,012

Derivatives (net) 32 92 (70) (54) -

AVC investments 1 - - - 1

27,841 3,289 (3,914) (2,203) 25,013

Cash 203 -

Other investment balances (net) (37) (4)

Total net investments 28,007 25,009

Change in market value reconciliation

2020 2019

£000 £000

Change in market value from reconciliation of net assets (2,203) 1,332

Exchange losses (1) (6)

(2,204) 1,326

Derivative investments include instruments often with a short duration that are traded regularly, principally forward

foreign exchange contracts. As a result the purchases and sales figures above appear large, relative to the opening

and closing positions, because they reflect the turnover of such transactions during the course of the year.

Investment transaction costs

Transaction costs are included in the cost of purchases and deducted from sales proceeds in the reconciliation above.

Direct transaction costs incurred are analysed as follows:

Equities 2020 2019

£000 £000 £000

Fees - - 1

Commissions 1 1 1

Taxes - - -

2020 total 1 1

2019 total 2 2

In addition to the direct transaction costs disclosed above, indirect costs are incurred through the bid-offer spread on

pooled investment vehicles and charges made within those vehicles. It has not been possible for the Group Trustees

to quantify such indirect transaction costs.




Page 27

9. Investment management expenses

2020 2019

£000 £000

Administration and management fees 27 22

Custody fees 2 5

29 27

10. Pooled investment vehicles

2020 2019

£000 £000

Equities 14,542 14,537

Bonds 10,470 10,263

Other - 473

25,012 25,273

11. Derivatives

Objectives and policies

The Group Trustees have authorised the use of derivative financial instruments by their investment managers as part

of their investment strategy as follows:

• Forward Foreign Currency – The Group Trustees invest in overseas markets and assets denominated in foreign

currency in order to construct a suitably diversified investment portfolio.

Outstanding derivative financial instruments at the year-end are summarised as follows:

2020 2020 2020 2019 2019 2019

Assets Liabilities Total Assets Liabilities Total

£000 £000 £000 £000 £000 £000

Over-the-counter contracts

Forward foreign currency - - - 33 (1) 32




Page 28

12. AVC investments

The number of AVC accounts (including "frozen" accounts) as at 31 March 2020 was 1 (2019: 1).

The aggregate amount of AVC investments held in pooled investment vehicles is as follows:

2020 2019

£000 £000

Prudential Assurance Society 1 1

13. Cash and other net investment balances

2020 2019

£000 £000

Cash - sterling - 203

Accrued interest and dividends - 10

Recoverable income tax 3 3

Other creditors (7) (7)

Amounts payable for the purchase of investments - (43)

(4) 166




Page 29

14. Fair value of investments

The fair value of investments has been determined using the following hierarchy:

• Level 1: Unadjusted quoted price in an active market for identical instruments that the entity can access at the

measurement date.

• Level 2: Inputs (other than quoted prices) that are observable for the instrument, either directly or indirectly.

• Level 3: Inputs are unobservable.

Where multiple inputs are involved in determining the fair value of an instrument, the categorisation is based on the

lowest level input (i.e. highest number) that is significant.

Pooled investment vehicles which are traded regularly are generally included in level 2. Where the absence of regular

trading or the unsuitability of recent transaction prices as a proxy for fair values applies, valuation techniques are

adopted and the vehicles are included in level 3 as appropriate.

The value of other pooled investment vehicles which are unquoted or not actively traded on a quoted market is

estimated by the Group Trustees. Where the value of the pooled investment vehicle is primarily driven by fair value

of its underlying assets, the net asset value advised by the fund manager is normally considered a suitable

approximation to fair value unless there are restrictions or other factors which prevent realisation at that value, in

which case adjustments are made. No such adjustments have been made to the valuations at 31 March 2020 or 31

March 2019.

The Group’s investment assets and liabilities have been included at fair value within the categories as follows:

Level 1 Level 2 Level 3 2020 Total

£000 £000 £000 £000

Investment assets

Pooled investment vehicles - 25,012 - 25,012

AVC investments - 1 - 1

Other investment balances 3 - - 3


Other investment balances (7) - - (7)

(4) 25,013 - 25,009




Page 30

Analysis for the prior year end is as follows:

Level 1 Level 2 Level 3 2019 Total

£000 £000 £000 £000

Investment assets

Equities 1,212 - - 1,212

Bonds 340 983 - 1,323

Pooled investment vehicles - 25,011 262 25,273

Derivatives - 33 - 33

AVC investments - 1 - 1

Cash 203 - - 203

Other investment balances 13 - - 13


Derivatives - (1) - (1)

Other investment balances (50) - - (50)

1,718 26,027 262 28,007

15. Investment risks

Financial Reporting Standards (FRS) 102 requires the disclosure of information in relation to certain investment risks.

These risks are set out by FRS 102 as follows:

• 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 price risk as follows:

o Currency risk: this is risk that fair value or future cash flows of a financial asset will fluctuate because of

changes in foreign exchange rates;

o Interest rate risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate

because of changes in market interest rates; and

o Other price risk: this is 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.

Investment strategy

Following advice from a professionally qualified investment adviser, the Group Trustees have agreed to an appropriate

investment strategy for the Group. The investment strategy has been set taking in to account a number of factors

including; the profile and value of the liabilities of the Group, the strength of employer covenant and the long-term

funding objectives agreed with the Employer.

During the accounting year, the Group’s investment strategy has changed (after the Group Trustees took advice) in

order to help improve overall performance by fully disinvesting from the segregated mandate, Ruffer Absolute Return

Fund and investing the proceeds to increase the exposure to the equity portfolio. This decision was taken due to the

poor performance record of Ruffer's Absolute Return Fund.




Page 31

The Group has a broad allocation of 58% (2019: 63%) of investments being in return seeking assets, designed to deliver

a return above that expected of a risk-free of return. A total of 42% (2019: 37%) is allocated to liability matching

assets, designed to partially offset the movements in the Group's liabilities caused by movements in interest rates and

inflation. This asset split reflects the Group Trustees' view of the most appropriate investments balancing risk/reward

characteristics of the funds the Group is invested in.

The Group invests in pooled investment vehicles only, operated by Legal and General ("L&G"). The Group Trustees

and their advisors carry out thorough due diligence before the appointment of new managers and before any new

monies are allocated to a new fund. The Group Trustees are also required to take appropriate investment advice from

a qualified professional. All decisions made by the Group Trustees in relation to the investment strategy are subject

to and comply with Section 36 of the Pensions Act 1995.

The Group Trustees are required to regularly review, and if necessary, update the Group's Statement of Investment

Principles. This is a statutory document which sets out, amongst other items: how the Group invests, the long-term

investment strategy for the Group, the policy for rebalancing, the benchmarks and objectives of the managers, the

Group Trustees' policy for monitoring performance and reviewing managers' role within the strategy. Details of the

custodian arrangements can also be found in the document.

Information on the Group Trustees' approach to risk management is set out in the sections below. The Group's AVC

investments have not been included in these risks as they are not considered material in relation to the overall

investments of the Group.

The risk exposures of the funds in which the Group hold investments are detailed in the table below:

Fund Credit Risk Currency Risk Interest Rate Risk Other Price Risk

L&G UK Equity Index � �

L&G North America Equity Index � � �

L&G N America Eq Index-GBP Hedged � � �

L&G Europe (ex UK) Equity Index � � �

L&G Europe (ex UK) Index-GBP Hedged � � �

L&G Japan Equity Index � � �

L&G Japan Equity Index-GBP Hedged � � �

L&G Asia Pac exJap Dev Eqty Index � � �

L&G A/Pac exJap Dev Index-GBP Hdgd � � �

L&G Global Emerging Markets Index � � �

L&G Over 5yr Index-Linked Gilts � � �

L&G Over 15yr Index-Linked Gilts � � �

Credit risk

Credit risk is the risk that the counterparty of a financial instrument could default on its obligations, or delay payment

of contractual income and the Group will incur a financial loss as a result.

The Group invests in pooled investment vehicles. These are exposed to direct credit risk, with there being an extreme,

albeit low, risk that the investment manager becomes defunct, acts fraudulently or that the manager no longer acts

on the Group's behalf or in the Group's best interests. However, this is mitigated by the use of custodian relationships

and by the ongoing monitoring undertaken by the advisors and Group Trustees. Currency hedges in the form of

forward FX contracts are executed with the client or fund’s custodian.




Page 32

The Group is exposed to credit risk through the index-linked gilt funds with L&G. These have a direct link to the British

Government credit rating, albeit the probability of default is minimal compared to that associated with corporations.

In addition, the Group is exposed to indirect credit risk as all the above pooled funds have the ability to undertake

derivative positions as part of their efficient portfolio management.

A summary of pooled investment vehicles by type of arrangement is as follows:

Type of arrangement 2020

£000

2019

£000

Unit-linked insurance contracts 25,012 24,597

Authorised unit trusts - 676

Total 25,012 25,273

At the end of the accounting year, all of the Group's assets were exposed to credit risk.

Currency risk

Currency risk is the risk that the value of assets will change due to movements in foreign exchange rates.

During the year the Group had some exposure to currency risk through overseas equity funds managed by L&G. The

Group Trustees have elected to have exposure to overseas equities through a combination of partially hedged and

unhedged funds managed by L&G.

In instances where returns are not hedged, then this is a deliberate and calculated action taken by the manager as a

means to generate additional returns through expected currency movements. The Group Trustees were comfortable

with the amount of risk this introduces in the context of the overall investment strategy.

The Group's total exposure to currency risk, as at the end of the accounting year was approximately c£7.9m, which is

31% of the total invested assets. Of this exposure, c£3.3m is invested in hedged or partially hedged equity funds. The

majority of currency risk exposure was in relation to US Dollar, Euro and Japanese Yen.

Interest rate risk

Interest rate risk is the risk that the value of fixed-rate instruments will change due to movements in market interest

rates.

During the year the Group was exposed to interest rate risk via investments held in the index linked gilt funds held

with L&G. The value of these instruments is sensitive to movements in interest rate expectations.

This level of exposure to the L&G index linked gilt funds was a deliberate position taken by the Group Trustees, in

order to gain increased exposure to interest rate movements and achieve greater matching of the Group's liabilities.

The objective of this exposure is to mitigate the impact of adverse movements in the Group's liabilities. The Group

Trustees however recognise that the Group's assets are designed to only capture part of the interest rate movement.

So even though the Group Trustees have taken steps to mitigate a significant proportion of interest rate risk, they have

not fully mitigated this risk.




Page 33

The Group's total exposure to interest rate risk as at the end of the accounting year was £10.5m, which is

approximately 42% of the Group's total assets. The all exposure was provided by bond instruments, including gilts,

rather than swap-based instruments.

Other risks, including price risk

Price risk is the risk that the value of a financial instrument will change due to movements in market prices or indices.

All of the Group's assets are exposed to additional price risks, other than those already listed above. This is due to the

managers' exposure to underlying asset classes, their ability to use derivatives within the funds and the additional

factors (such as inflation, supply / demand and liquidity) which determine an asset's price, beside those described

above. This level of exposure to price risk is not uncommon for pooled investment vehicles, regardless of whether

they are passive or active mandates.

The effect of COVID-19 has significantly impacted the market price of the Group’s equity funds, detracting from the

overall performance of the portfolio. Drawdown peaked on 23 March 2020, where the market witnessed its lowest

value during this accounting year. The Group Trustees are aware of these risks and the Group manages this exposure

to overall price movements by constructing a diverse portfolio of investments across various asset classes and markets.

16. Concentration of investments

Investments accounting for more than 5% of the net assets of the Group at 31 March 2020 or 31 March 2019 were:

2020 2020 2019 2019

£000 % £000 %

L&G Over 15yr Index Linked Gilts 7,482 30 7,343 26

L&G UK Equity Index 6,678 26 6,666 24

L&G Over 5yr Index Linked Gilts 2,988 12 2,920 10

L&G North America Equity Index 1,595 6 1,641 6

17. Employer-related investments

As at 31 March 2020 the Group had none of its assets (2019: £nil) invested directly in Schneider Electric Limited and

0.104% of its investment assets (2019: 0.071%) invested indirectly through pooled investment vehicles in the Principal

Employer.

18. Current assets

2020 2019

£000 £000

Contributions due from Employers in respect of:

Employers 48 -

Employees 1 -

Cash balances 201 95

250 95




Page 34

19. Related party transactions

Related party transactions and balances comprise:

Key management personnel

Contributions were received in respect of one Group Trustee and pensions were paid in respect of one Group Trustee

in accordance with the Group’s rules.

Employer and other related parties

Administrative services are provided by the Employer without recharge to the Group.

All administrative expenses of the Group incurred during the years to 31 March 2020 and 31 March 2019, and not

directly related to the management of the investment portfolios, were met by the Employer.

20. Contingencies and commitments

In the opinion of the Group Trustees the Group had no (2019: none) contingent liabilities entered into which are not

provided for in these Financial Statements.

21. Subsequent events

There were no subsequent events requiring disclosure in the financial statements.



Independent Auditors’ Statement about contributions to the Group Trustees

of the Schneider Group of the Electricity Supply Pension Scheme

Page 35

Statement about contributions

Opinion

In our opinion, the contributions required by the schedule of contributions for the Group year ended 31 March 2020 as reported in Schneider Group of the Electricity Supply Pension Scheme’s summary of contributions have, in all material respects, been paid in accordance with the schedule of contributions certified by the Group actuary on 30 June 2017.

We have examined Schneider Group of the Electricity Supply Pension Scheme’s summary of contributions for the Group year ended 31 March 2020 which is set out on the following page.

Basis for opinion

Our examination involves obtaining evidence sufficient to give reasonable assurance that contributions reported in the summary of contributions have, in all material respects, been paid in accordance with the relevant requirements. This includes an examination, on a test basis, of evidence relevant to the amounts of contributions payable to the Group under the schedule of contributions and the timing of those payments.

Responsibilities for the statement about contributions

Responsibilities of the Group Trustees in respect of contributions

As explained more fully in the Statement of Group Trustees’ responsibilities, the Group’s Group Trustees are responsible for preparing, and from time to time reviewing and if necessary revising, a schedule of contributions and for monitoring whether contributions are made to the Group by employers in accordance with relevant requirements.

Auditors’ responsibilities in respect of the statement about contributions

It is our responsibility to provide a statement about contributions and to report our opinion to you.

Use of this report

This report, including the opinion, has been prepared for and only for the Group Trustees as a body in accordance with section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Original Signed by PricewaterhouseCoopers LLP 7th August 2020

PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds Date



Summary of contributions

Page 36

During the year, the contributions required by the schedule of contributions to be paid to the Group by the Employer

were as follows:

Contribution Type Employer

£000

Employee

£000

Total

£000

Required by the Schedule of Contributions as reported on by the Group Auditors:

Normal 55 9 64

Deficit funding 520 - 520

Total 575 9 584

In addition the Employer meets directly the cost of the PPF Levy.

Approved by the Group Trustees and signed on their behalf on .................................

Signature

Original signed by Chair of Trustees




Schedule of contributions

Page 37




Page 38




Page 39




Page 40



Actuarial Certificate of Schedule of Contributions

Page 41



Names and addresses of external bodies

Page 42

The Pensions Advisory Service

The Pensions Advisory Service is available to help members and beneficiaries of occupational pension schemes resolve

any difficulties they may have encountered and which they have failed to resolve with the trustees or administrators

of schemes. The Pensions Advisory Service may be contacted either while a complaint is being reviewed under the

dispute resolution procedure or if the complainant is not satisfied with the response received from the Group Trustees

under the second stage of the procedure.

The Pensions Advisory Service can be contacted at 11 Belgrave Road, London SW1V 1RB.

Telephone: 0800 011 3797

Website for online contact: www.pensionsadvisoryservice.org.uk

Pensions Ombudsman

The Pension Ombudsman is available to help members and beneficiaries of occupational pension schemes resolve any

difficulties they may have encountered and which they have failed to resolve with the trustees or administrators of

schemes. The Pension Ombudsman may be contacted either while a complaint is being reviewed under the dispute

resolution procedure or if the complainant is not satisfied with the response received from the Group Trustees under

the second stage of the procedure. The Ombudsman can investigate and determine any complaint or dispute of fact

or law involving occupational pension schemes. The services of the Ombudsman are available to the members,

beneficiaries and prospective members of pension schemes.

The Pensions Ombudsman can be contacted at 10 South Colonnade, Canary Wharf, E14 4PU.

Telephone: 0800 917 4487

E-mail: [email protected] (early resolution)

E-mail: [email protected]

The Pensions Regulator

The Pensions Regulator has statutory objectives to protect members’ benefits, to reduce risk of calls on the Pension

Protection fund (PPF), to promote good administration, to maximise employers’ compliance with their new duties in

relation to automatic enrolment and to minimise any adverse impact on sustainable growth of an employer when

exercising its functions under the Scheme Funding Legislation.

The Pensions Regulator can be contacted at Napier House, Trafalgar Place, Brighton, BN1 4DW.

Telephone: 0345 600 0760

E-mail: [email protected]

Website: www.thepensionsregulator.gov.uk



Names and addresses of external bodies

Page 43

The Department for Work and Pensions (DWP) Pension Tracing Service

The purpose of the DWP’s Pension Tracing Service is to provide a tracing service for ex-members of schemes and their

dependants with pension entitlements who have lost touch with earlier employers and their schemes. The ESPS is

registered with the DWP under Scheme reference number 10200656.

The Pension Tracing Service can be contacted at The Pension Service 9, Mail Handling Site A, Wolverhampton, WV98

1LU.

Telephone: 0800 731 0193

From outside the UK: +44 (0)191 215 4491

Website: www.gov.uk/find-pension-contact-details

Pension Wise

Pension Wise is a new Government service that offers individuals tailored guidance, online, over the telephone or face

to face:

• to explain what options are available and how to make the best use of pension savings;

• information on the tax implications of the different options and other important considerations; and

• tips on getting the best deal, including how to shop around.

Website: www.pensionwise.gov.uk

The Pension Protection Fund

The Pension Protection Fund was established to pay compensation to members of eligible defined benefit pension

schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient

assets in the pension scheme to cover Pension Protection Fund levels of compensation.

The Pension Protection Fund can be contacted at: PPF Member Services, P.O. Box 254, Wymondham, NR18 8DN.

Telephone: 0330 123 222


Website: www.pensionprotectionfund.co.uk

Documents

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