BT 1999 Annual Report Download - page 87

NOTES TO THE FINANCIAL STATEMENTS
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28. Pension costs
The total pension cost of the group expensed within staff costs was £176m (1998 – £177m, 1997 – £291m), of which £167m
(1998 – £169m, 1997 – £281m) related to the group’s main pension scheme, the BT Pension Scheme (BTPS). The reduction
in the cost in the years ended 31 March 1998 and 1999 compared with the year ended 31 March 1997 was mainly attributable
to the greater than assumed return on the BTPS assets in the three-year period to 31 December 1996, ie between the last
two actuarial valuations.
The pension costs for the years ended 31 March 1998 and 31 March 1999 were based on the valuation of the BTPS at
31 December 1996. The pension cost for the year ended 31 March 1997 was based on the valuation of the BTPS at
31 December 1993. The valuations, carried out by professionally qualified independent actuaries, used the projected unit
method. The valuations were determined using the following long-term assumptions:
Rates (per annum)
`1996 1993
%%
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Return on existing assets, relative to market values 8.0 8.6
Return on future investments 8.4 9.7
Real equity dividend growth 0.75 0.5
Average increase in retail price index 4.0 5.0
Average future increases in wages and salaries 5.8 6.8
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At 31 December 1996, the assets of the BTPS had a market value of £19,879m and were sufficient to cover 100.3% of the
benefits that had accrued to members by that date, after allowing for expected future increases in wages and salaries but not
taking into account the costs of providing incremental pension benefits for employees taking early retirement under release
schemes since that date. This cost, which amounted to £279m in the year ended 31 March 1999 (1998 – £224m), will be taken
into account at the next planned actuarial valuation at 31 December 1999. The incremental pension cost of employees taking
early retirement in the year ended 31 March 1997, which amounted to £258m, was included in redundancy costs charged to the
profit and loss account in that year.
In the year ended 31 March 1999, the group made regular contributions of £239m (1998 – £238m, 1997 – £232m) and a special
contribution of £200m.
Certain activities of the BTPS are carried out at the company’s pension centre, all costs of which are borne by the company.
These costs have not been apportioned for accounting purposes between those attributable to the BTPS and those attributable
to the company because functions maintained for both entities cannot be meaningfully divided between them. The company
occupies seven properties owned by the scheme on which an annual rental of £3m is payable.
The BTPS assets are invested in UK and overseas equities, UK and overseas properties, fixed interest and index linked
securities, deposits and short-term investments. At 31 March 1999, the UK equities included 46 million (1998 – 42 million)
ordinary shares of the company with a market value of £463m (1998 – £270m).