PENSION NEWS Airbus Group UK Pension Scheme

Newsletter for active and deferred members of Schedules 1, 2 and 3. Issued February 2021 Chairman’s Update

Welcome to the latest edition of Pension News which includes a summary of the Trustee Report and Accounts as at 5 April 2020.

This has been a challenging year, with the COVID-19 pandemic having a potential impact on pension scheme funding and unusual demands being placed on the Scheme’s operational activity. We have also seen some changes to the Trustee and management team responsible for the Scheme and we introduce the new contacts to you in this Newsletter.

The triennial actuarial valuation of the Scheme is currently ongoing and progress will be reported in a Newsletter later in 2021. We have made a number of changes to the asset allocation as the Trustee seeks to continue to capture good returns on the assets but with an appropriate focus on risk.

The Scheme continuously monitors its approach to governance and this year we assessed the DC Code of Practice to ensure that we meet with standards set by the Pensions Regulator. This newsletter will outline some of the key objectives that the Scheme is working towards in order to remain compliant and create an excellent member experience.

If you have any feedback on Pension News we welcome your comments alongside any ideas for future topics that you would like to see covered.

Bill Newman, Chairman of Trustees Pension News 2021 - Active and Deferred 2

Scheme Report Scheme Finances

Income and Expenditure The Scheme’s auditor Ernst and Young LLP, has Membership by Type given an unqualified audit opinion on the financial (not including Schedules 4 and 5) Net assets of the Scheme at 6 April 2019 £1,131.8m statements for year ending 5 April 2020, confirming that the financial statements give a true and fair Active Members @ 5 April 2020 – Total Income £74.3m view of the Scheme’s financial transactions during Schedule 1 3302 the year and the net assets at the year end. Schedule 2 365 + Total Outgoings £25.7m Schedule 3 231 The auditor has also given an unqualified Total 3898 + Change in market value of investments £66.3m statement on the contributions, confirming that the contributions payable to the Scheme for Deferred Pensioners 2222 = Net assets of the Scheme at 5 April 2017 £1,114.1m the year ended 5 April 2020 have been paid in Pensioners & Dependants 1017 accordance with the Schedule of Contributions. Total Membership 7137 You can request a copy of the full Annual Report Contributions by Employer and Accounts from the Secretary to the Trustee. @ 5 April 2020

5.59

3.02

37.62 53.40

0.37

ius eence and Sace ius ius elicotes ius ou SS Annualised investment performance Defined Benefit Investments 5 4 5 ear retr 5.1 3 ear retr Investment markets over the twelve month period to 5 April 2020 were dominated by the global COVID-19 2.1 pandemic with negative overall performance reported on the Scheme assets. Equity markets were strong in the first 9 months but assets were put into “freeze” during the final quarter as economies attempted to protect against the spread of the virus. 1 ear retr 3.7 Brexit impacted Sterling which fell, impacting overseas equity gains, but the Scheme benefited from its 50% currency hedge. Property market trading was suspended in the final quarter and lease renewals 4 slowed dramatically. Bond yields were volatile throughout the year but fell noticeably in the final quarter as 5 rates were cut and the UK Government took action to support businesses during the pandemic. Asset Allocation @ 5 April 2020 Post year end we have seen some recovery in equity markets but investment conditions remain uncertain.

6.31 The Trustee Board continued to keep its investment strategy under review to meet its long term objective 13.28 0.18 to seek extra return but with little added risk, particularly through greater diversification of asset classes. 2.97

A strategic allocation was made to opportunistic credit of £80m split between two investment managers 15.07 (Alcentra in the EU region and BeachPoint in the US). Property investments were redeemed from Aviva and reinvested in a portfolio covering a number of different commercial property funds through a mandate with Aegon. The Trustee also decided to make a strategic allocation to a Liability Driven Investment (LDI) 3.17 mandate with BMO in Q3 2020 which will be funded by switching the Index Linked Gilts and Fixed Gilts 32.78 9.24 from State Street and BMO will hold any balance of Index Linked Gilts outside of the LDI mandate.

Comprehensive details of the Trustee Board’s investment strategy are set out in the Statement of 17.00 Investment Principles (SIP) a copy of which can be obtained from the Scheme’s mailbox at ukpensions@ airbus.com oet und iate edit eging aet uities uities Inflation Opportunities nastuctue otunistic edit ntenational uities (5 hedged) nde ined ilts e 5 eas Pension News 2021 - Active and Deferred 4

Defined Contribution Investments

Airbus Lifestyle Funds Performance of Individual Funds Members who are invested in the Airbus Lifestyle funds will have seen low The return on each of the Legal & General funds at 30 September 2020 held investment returns over the past year when compared to the longer term. during the year is shown in the table below.

Under these funds, when you are more than 15 years away from retirement Performance Net of Fund Management Charges 1 year 3 Year Annualised age the Lifestyle fund will be invested in global equities. Global equities can Global Equity Fixed Weights 50:50 Index 3 -5.87 2.55 be volatile over the short term, but the expectation is that over the long term AAA-AA-A Corp Bond Over 15 Year Index 3 8.54 8.83 such funds will perform better than many other types of investment (with 50% L&G PMC World (Ex-UK) Equity Index 3 6.74 10.00 allocated to the UK). Pensions are long term investments. As you approach L&G PMC UK Equity Index 3 -15.83 -2.70 retirement, under this Lifestyle approach, your investments will automatically L&G PMC Over 15 Year Gilts Index 3 6.39 9.91 switch to more stable investment assets to consolidate what you have built up L&G PMC Ethical Global Equity Index 3 5.37 9.57 L&G PMC World Emerging Markets Equity Index 3 3.85 4.40 and provide some protection against investment market volatility. L&G PMC Over 5 Year Index Linked Gilts Index 3 1.22 7.46 NWW3 - L&G PMC Diversified 3 -0.64 4.32 Over the year to 30 September 2020 the Global Equity fund delivered negative BN73 - L&G PMC Veritas Global Focus Fund 3 4.38 9.28 returns of -5.87%. This performance was affected by sharp falls during the first BB43 - L&G Pmc Hsbc Islamic Global Equity Index Fund 3 23.16 17.69 quarter of 2020 due to the impact of the COVID-19 global pandemic. BT53 - L&G Pmc Invesco Global Targeted Returns 3 -1.57 n/a NEN3 - L&G Pmc Pre-Retirement 3 6.00 7.21 The Trustees monitor the investment performance of each fund available to BY93 - CASH (Suspensions) 3 0.44 n/a members on a quarterly basis. You can find a copy of the Trustee’s statement on DC governance onthe From previous experience within the Scheme, the Trustees believe that most Scheme’s website at www.airbus.com/company/uk-pensions.html members will use their AVCs as part of their tax free cash entitlement. The statement covers the process and considerations of the Trustee relating to The automatic fund choice set by the Trustee (the Airbus Cash Lifestyle) is designed the Scheme’s DC Sections including: to recognise this and move members into suitable funds as they approach retirement. • Management of the Scheme’s default investment arrangements If you are thinking of doing something different with your fund at retirement (for • Processing of core financial transactions example purchasing an annuity or take income from it), you may wish to consider • Disclosure of fund charges the alternative lifestyle funds which may be more suitable for your needs. • Information regarding investment transaction costs • ‘Value for members’ assessment Please visit your online L&G account to see the full range of funds available to you • The Trustee Directors’ knowledge and understanding along with fund fact sheets to help you make an informed decision. News in 2020

Impact of COVID-19 Covid-19 has caused disruption to economic activity which has been reflected The Trustee Board also reviewed the default investment options and have in fluctuations in global stock markets and, in turn, in the valuation of Scheme decided to make some minor adjustments. Largely this will shift the allocation assets. The Employers’ business has been affected by the ructions caused of equity investments more to overseas assets. Details will be communicated by the pandemic and the airline business has particularly been hit because of to all affected members in seperately. travel restrictions caused by the virus. These matters will be considered during the ongoing valuation of the Scheme and adjustments will be made to the level of contributions. The Trustee has appointed a covenant assessor, Actuarial Valuation Limited to help them understand the strength of the Employers in support of Every three years the Scheme Actuary carries out a valuation for the Scheme the Scheme. to compare the assets held against the projected benefits to be paid out, based on a number of financial and demographic assumptions. The Trustee is working with its advisers and the Scheme administrators, to ensure the continued smooth running of the Scheme. The DB and DC These valuations determine the funding level and contribution rates which are administrators have demonstrated their ability to maintain the operational agreed between the Trustee and the Principal Employer and cover the period effectiveness of the Scheme with new working practices to ensure continuity to the next formal valuation. In between each formal valuation the Scheme of their services. However the DB administrator experienced some difficulty Actuary provides an annual update on the funding position of the Scheme to with increased workloads and is working hard to resolve these problems. the Trustee and we normally include a Summary Funding Statement with the Administration activity has also increased since the Employers have embarked Pensions Newsletter. on adaption programmes that have led to a greater number of early retirements. We are currently in the process of dealing with the actuarial valuation as at 5 April 2020, so there is no Summary Funding Statement yet available for 5 April Review of DC Fund options 2020 until the valuation process has been concluded. The Trustee Board conducted an assessment of the value for money of the DC funds which are applicable to the Retirement Account in Schedule 1 and any Contributions both during the year and since the year end have been received members who pay Additional Voluntary Contributions. The Trustee’s advisers in accordance with the Schedule of Contributions. The Trustee is in regular have confirmed that the DC schemes comply to a high standard in all aspects. contact with the Principal Employer regarding the impact of Covid-19 on the Principal Employer’s continuing support of the Scheme. Pension News 2021 - Active and Deferred 6

Pensions Consultative Committee

The Pensions Consultative Committee (PCC) is made up of elected members of A number of vacancies are in the process of being publicised, and renewal the Scheme who represent the views of the wider membership. The Company elections are due. and Trustees often use the PCC to discuss potential changes to the Scheme and likewise, the PCC uses the forum as an opportunity to provide feedback on any The PCC welcomes contact from members across the Scheme and encourages ideas that have been raised by members. The PCC meets regularly to discuss you to get in touch with any feedback, questions or comments that you may have. topical issues both within the Scheme and on wider pension industry issues.

There have been recent elections in Portsmouth and Filton. See the table below for a list of PCC members and the consistencies they represent:

Name Constituency Status Chris Beard Pensioners All Locations PCC Vacancy Filton PCC Steve Chafer Leicester Newcastle The Strand Hook Guildford Compass-House PCC & Trustee Keith Clark Guildford SSTL Bordon PCC Paddy Francis Newport PCC & Trustee Vacancy Newport Matt Johnson Broughton PCC Chairman David Maver Broughton PCC Guy Newham Portsmouth PCC Steve Parker Portsmouth PCC & Trustee Sebastian Pupek Oxford Aberdeen Hawarden Shawbury Valley PCC Mick Sheahan* Stevenage PCC Vice Chairman Dave Sutton Pensioners All Locations PCC Valerie Valentin Stevenage PCC Phil Wadey Hawthorn Oakhanger Bordon PCC Richard Ware Filton PCC & Trustee

*Mick Sheahan subsequently retired from the PCC in December 2020. Trustee and Advisers

Pensions Team Sarah Bartram has replaced Laura Millard as Pensions Services Manager, based Trustee and Advisors in Stevenage. The Pensions Team are responsible for Scheme management aspects and ensuring operational delivery of services by external administrators Trustee Airbus UK Pension Trustee and advisers. If you would like to make an appointment to speak to a team Bill Newman Chairman of the Trustee Board member, please contact [email protected] Steve Chafer Member Nominated Director

Paddy Francis Member Nominated Director Changes to the Trustee Board Steve Parker Member Nominated Director In December 2020, Clive Bugeja was replaced as Scheme Secretary by Bushra Ed Rackham Employer Nominated Director Chaudry of Capital Cranfield, who now provides secretariat services to the Lukshmi Selvarajah Independent Director, Capital Cranfield Trustee Board. Karen Thomas Employer Nominated Director Lukshmi Selvarajah was appointed in September 2020 as a temporary additional Richard Ware Member Nominated Director independent trustee to assist through the actuarial valuation process. Marcus Wilhelm Employer Nominated Director

Principal Employer Airbus Defence and Space Limited

Pensions Manager Sarah Bartram

Secretary to the Trustee Bushra Chaudry, Capital Cranfield

Scheme Actuary Adam Boyes,

Administrator Willis Towers Watson

Auditor Ernst & Young LLP

Banker HSBC Bank

Investment Lane Clark & Peacock Defined Contributions Additional Voluntary Contributions Legal & General Assurance Society Retirement Account Provider

Solicitors and Legal Adviser Sacker & Partners LLP Pension News 2021 - Active and Deferred 8

Scheme Contacts

Scheme website Pensions Manager www.airbus.com/company/uk-pensions.html Tel: 07919 396009 E-mail: [email protected] Scheme email address [email protected] The Department for Work and Pensions Details or a personal quotation of your State pension can be obtained from: The on-line administration site, ePA, can be found at: www.thepensionservice.gov.uk or by phoning 0845 60 60 265. https://epa.towerswatson.com/doc/AST/login.htm Independent financial advice The Legal & General ‘Manage your Account’ site can be found at: The Airbus Group Pensions Team, the Trustee Directors, the PCC members, www.landg.com/manageyouraccount Willis Towers Watson and Legal & General are not authorised to give you financial or investment advice. To obtain impartial financial advice, members are advised to contact an Independent Financial Adviser (IFA). If you have left employment you should contact Towers Watson to raise any queries about your pension at: You can find a list of the IFAs in your postal area by contacting IFA Promotion on 0117 971 1177 or visiting www.unbiased.co.uk Airbus Group UK Pension Scheme Towers Watson Limited, PO Box 545, Redhill, RH1 1YX Tel: 01707 607618 If you have difficulty reading this document you can obtain E-mail: [email protected] an audio copy by contacting the Pensions Manager. If you have queries about the management of the Scheme or you require details of the dispute resolution procedure, please contact Bushra Chaudry, Scheme Secretary at:

Airbus Group Pension Scheme Trustee Gunnels Wood Road, Stevenage, SG1 2AS Tel: 0115 896 4654E-Mail: [email protected] Notes Pension News 2021 - Active and Deferred 10

Notes 13133pc