Preliminary Results -13-
30 Novembre 2011 - 8:01AM
UK Regulatory
MBS have admitted body status in the Teesside pre-funded defined
benefit scheme, as employees of MBS who were previously employed by
the local council remain members of the Teesside Pension Fund. Up
to 31 May 2011, the assets and liabilities of this scheme were
identified under retirement benefit obligations on the Consolidated
balance sheet and disclosed as third-party schemes in section d
overleaf. From 1 June 2011, as part of the renegotiated extension
of the associated customer contract, the pension risk now rests
with the original customer (transferor) and from this date the
Teesside Scheme has been accounted for on a defined contribution
basis under a above. The curtailment gain of GBP1.9m, arising from
the elimination of the accounting deficit on this scheme at 31 May
2011, has been included within exceptional items, as disclosed in
note 3.
c Schemes accounted for on a defined benefit basis - Group
schemes
The Mouchel Business Services Limited Pension Scheme (MBS), the
Mouchel Superannuation Fund (MSF) and the Mouchel Staff Pension
Scheme (MSPS) are funded defined benefit schemes and are disclosed
as Group schemes in section d overleaf. For these three principal
defined benefit schemes the future liabilities for benefits are
provided for by the accumulation of assets held externally to the
Group in separate, trustee-administered funds. The cost of these
schemes is determined in accordance with the advice of independent,
professionally qualified actuaries on the basis of formal actuarial
valuations using the projected unit credit method. In line with
normal business practice these valuations are undertaken on a
triennial basis.
All schemes are closed to new entrants except for employees
transferring to the Group under TUPE, where the Group is required
to provide benefits which are broadly comparable to those provided
under the Local Government Pension Scheme or another defined
benefit scheme provided by the transferring employer. The Group
schemes were closed to future accrual of benefit on 31 December
2010 for all non-public sector members with these members being
offered entry to the Group's defined contribution schemes from 1
January 2011.
Given the membership of the schemes, under the projected unit
credit method the current service cost would be expected to
increase as the members of the scheme approach retirement.
The date of the last full actuarial valuation for each of the
schemes was March 2010.
Liverpool 2020 Limited has admitted body status in the
Merseyside pre-funded defined benefit scheme, as employees of
Liverpool 2020 Limited who were previously employed by the local
council remain members of the Merseyside Pension Fund. The pricing
mechanism within the contract allows for the pension costs to be
charged to the council on an annual basis and accordingly we have
accounted for this pension scheme on a defined contribution basis.
However, there is a risk, due to external factors between the 2010
actuarial valuation and the contract end date of 30 September 2013,
that the values advised by the actuaries to be recovered from the
council are insufficient and a deficit arises at the end of the
contract that cannot be recovered from the customer.
The key assumptions used in valuing the retirement benefit
obligation at the end of the year were:
2011 2010
% %
================================================== ==== =======
Discount rate 5.4 5.4/5.4
Expected rate of increase in pensionable salaries 3.4 2.6/3.0
Expected rate of increase in pensions in payment 2.4 2.3/3.0
Expected rate of price inflation (RPI) 3.4 3.0/3.0
Expected rate of price inflation (CPI) 2.9 -
================================================== ==== =======
Note: Data for 2011 is for Group schemes only but for 2010 Group
schemes is given first, followed by data for third-party
schemes.
2011 2010
Years Years
======================================= ====== =========
Life expectancy at age 65:
- current pensioners: male 87.2 87.1/87.2
female 90.0 90.0/90.1
- future pensioners: male 88.2 88.1/88.1
female 91.0 90.9/90.9
======================================= ====== =========
Note: Data for 2011 is for Group schemes only but for 2010 Group
schemes is given first, followed by data for third-party
schemes.
The effect of the Government's announcement that increases in
future pensions will be in line with the Consumer Price Index (CPI)
rather than the Retail Price Index (RPI) have, where appropriate,
been taken into account in the calculation of the retirement
benefit obligations.
The sensitivity associated with these assumptions is as
follows:
Effect on deficit
Mouchel
Group MBS Group
scheme scheme
Change GBPm GBPm
================================= ======== ================= =========
Discount rate -/+ 0.1% -/+ 4.4 -/+ 1.6
Expected rate of price inflation -/+ 0.1% -/+ 3.8 -/+ 1.5
-/+ 1
Life expectancy year -/+ 6.2 -/+ 2.5
================================= ======== ================= =========
The trustees of each scheme determine the investment strategy
for the assets held by the scheme, in consultation with the
principal employer.
The expected return on the scheme assets in the forthcoming year
is as follows:
%
============================================== ====
Equities and diversified growth funds ('DGF') 8.4%
Bonds, gilts and cash 4.4%
Property 6.4%
============================================== ====
Note: Data is for Group schemes only.
Equity and DGF returns are assumed to return 4.5% above gilts in
the long term. Bonds are assumed to return in line with the
discount rate (5.4%) and gilts and liability driven investments are
assumed to return at the 20 year UK gilt yield rate (3.9%) which
reflects the average life of the liabilities. Cash is assumed to
return at the Bank of England base rate (0.5%) and property at gilt
yield plus a risk premium of 2.5%.
d Defined benefit pension schemes
The amounts recognised in the balance sheet are as follows:
Group Third-party
schemes schemes Total Total
2011 2011 2011 2010
GBPm GBPm GBPm GBPm
============================================== ======== =========== ======= =======
Equities and diversity growth funds 185.7 - 185.7 216.5
Bonds and gilts 84.9 - 84.9 78.7
Cash 2.5 - 2.5 7.8
Property 11.5 - 11.5 13.1
Unpaid contributions - - - (0.7)
============================================== ======== =========== ======= =======
Fair value of plan assets 284.6 - 284.6 315.4
Present value of obligations (317.4) - (317.4) (368.4)
============================================== ======== =========== ======= =======
Liability in the balance sheet (32.8) - (32.8) (53.0)
============================================== ======== =========== ======= =======
Current liability (0.7) - (0.7) (0.7)
Non-current liability (32.1) - (32.1) (52.3)
============================================== ======== =========== ======= =======
Total liability in the balance sheet as above (32.8) - (32.8) (53.0)
============================================== ======== =========== ======= =======
Movements in the defined benefit obligation are as follows:
Group Third-party
schemes schemes Total Total
2011 2011 2011 2010
GBPm GBPm GBPm GBPm
================================================== ======== =========== ======= =======
Retirement benefit obligations at the beginning
of the year (303.9) (64.5) (368.4) (328.5)
Service cost (3.2) (1.0) (4.2) (6.4)
Interest cost (16.2) (2.7) (18.9) (19.9)
Employee contributions (1.3) (0.5) (1.8) (3.1)
Past service costs 3.9 3.8 7.7 -
Benefits paid 13.0 1.3 14.3 10.9
Actuarial loss (9.7) (8.0) (17.7) (21.4)
Elimination upon settlement/curtailment of scheme - 71.6 71.6 -
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