Preliminary results for the 52 weeks ended 2 February 2008
Notes to the financial information
For the financial year ended 2 February 2008
8. Post employment benefits
Movements in the present value of defined benefit (obligations)/assets on the balance sheet are as follows:
| 2007/08 | 2006/07 | |||||
|---|---|---|---|---|---|---|
| £ millions | UK | Other | Total | UK | Other | Total |
| Deficit in scheme at beginning of year | (28) | (27) | (55) | (210) | (29) | (239) |
| Total service cost charged in the income statement | (26) | (3) | (29) | (35) | (5) | (40) |
| Interest cost | (74) | (2) | (76) | (66) | (1) | (67) |
| Expected return on pension scheme assets | 88 | - | 88 | 73 | - | 73 |
| Actuarial gains/(losses) | 49 | (2) | 47 | 92 | 3 | 95 |
| Contributions paid | 101 | 2 | 103 | 118 | 4 | 122 |
| Settlements and curtailments | - | 1 | 1 | - | - | - |
| Exchange differences | - | (2) | (2) | - | 1 | 1 |
| Surplus/(deficit) in scheme at end of year | 110 | (33) | 77 | (28) | (27) | (55) |
The assumptions used in calculating the costs and obligations of the Group’s defined benefit pension plans, as shown in the tables below, are set by the Directors after consultation with independent professionally qualified actuaries.
| 2007/08 | 2006/07 | |||
|---|---|---|---|---|
| Annual % rate | UK | Other | UK | Other |
| Discount rate | 6.2 | 5.3 to 5.5 | 5.3 | 4.6 to 5.5 |
| Salary escalation | 4.1 | 2.0 to 6.6 | 4.5 | 3.5 to 6.7 |
| Rate of pension increases | 3.3 | - | 2.9 | - |
| Price inflation | 3.3 | 2.0 to 2.5 | 2.9 | 2.0 to 2.5 |
| 2007/08 | 2006/07 | |||
|---|---|---|---|---|
| % rate of return | UK | Other | UK | Other |
| Equities | 8.1 | - | 7.8 | - |
| Bonds | 5.3 | - | 4.9 | 4.5 |
| Property | 6.7 | - | 6.3 | - |
| Other | 4.3 | 4.0 | 3.9 | 4.0 |
| Overall expected rate of return | 6.8 | 4.0 | 6.5 | 4.0 |
The UK discount rate is based on the yield on the iBoxx over 15-year AA-rated Sterling corporate bond index. The overall expected rate of return on plan assets reflects market expectations at the valuation date of long-term asset returns and the mix of assets in the plans.
| 2007/08 | 2006/07 | |
|---|---|---|
| Age to which current pensioners are expected to live (60 now) | ||
| - Male | 87.2 | 85.1 |
| - Female | 85.9 | 86.3 |
| Age to which future pensioners are expected to live (60 in 15 years time) | ||
| - Male | 88.8 | 86.2 |
| - Female | 87.1 | 87.5 |
The mortality assumptions used in the actuarial valuations of the Group’s UK defined benefit pension liabilities have been selected with regard to the characteristics and experience of the membership of the plan from 2004 to 2007.
The following table analyses, for the UK Plan, the estimated impact on plan obligations resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.
| Assumption | Change in assumption | Impact on UK plan liabilities |
|---|---|---|
| Discount rate | Increase/decrease by 0.1% | Decrease/increase by £24m |
| Salary escalation | Increase/decrease by 0.1% | Increase/decrease by £3m |
| Rate of pension increases | Increase/decrease by 0.1% | Increase/decrease by £14m |
| Price inflation | Increase/decrease by 0.1% | Increase/decrease by £24m |
| Mortality | Increase in life expectancy by one year | Increase by £40m |
