Annual report and financial statements 2009

Notes to the Company financial statements

39 Pensions

a) Defined benefit pension scheme

The Company operates a pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held in a separate trustee administered fund. The latest full actuarial valuations were carried out at 6 April 2007 and were updated for FRS 17 purposes for the periods to 1 February 2009 by a qualified independent actuary.

The current best estimate of employer contributions to be paid for the year commencing 2 February 2009 is £25m (2008: £50m).

b) Assumptions

The major assumptions used in this valuation to determine the present value of the scheme’s liabilities were as follows:

i) Longevity

The average life expectancy in years of a member who reaches normal retirement age of 65 and is currently aged 45 is as follows:

The average life expectancy in years of a member retiring at the age of 65 at balance sheet date is as follows:

Assumptions regarding future mortality experience are set based on advice in accordance with published statistics. The current mortality table used is PNX00 YOB LC (2008: PNX00 YOB LC).

The major assumptions used to determine the expected future return on the scheme’s assets, were as follows:

The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescales covered, may not necessarily be borne out in practice.

c) Valuations

The fair value of the scheme’s assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme’s liabilities which are derived from cash flow projections over long periods and are inherently uncertain, were as follows:

The movement in the fair value of the scheme’s assets over the year was as follows:

The above pension scheme assets do not include any investments in the Company’s own shares or property occupied by any member of the Group.

The movement in the present value of the defined benefit obligation during the period was as follows:

d) Sensitivities

Below is listed the impact on the liabilities at 1 February 2009 of changing key assumptions whilst holding other assumptions constant:

e) Profit and loss account impact

The following amounts have been charged in arriving at operating profit in respect of pension costs:

The amounts for current and past service cost have been charged to the following profit and loss account lines:

The following amounts have been included in other finance income:

f) Amounts recognised in Statement of total recognised gains and losses (STRGL)

The amounts included in the STRGL were:

The actual return on scheme’s assets can therefore be summarised as follows:

The expected return on scheme’s assets was determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date. Expected returns on equity and property investments reflect long term real rates of return experienced in the respective markets.

g) History of experience gains and losses

h) Defined contribution pension scheme

Employees joining the Company after September 2000 are no longer eligible to gain automatic entry into the final salary pension scheme. In June 2001 the Company established a stakeholder pension scheme, open to all employees, to which the Company makes matching contributions of a maximum of 5% of eligible earnings. Pension costs for the defined contribution scheme are as follows:

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