BT 2006 Annual Report Download - page 103

29. RETIREMENT BENEFIT PLANS continued
At 31 December 2002, the assets of the BTPS had a market value of £22.8 billion (1999: £29.7 billion) and were sufficient to
cover 91.6% (1999: 96.8%) of the benefits accrued 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 leaving under release schemes since
that date. This represents a funding deficit of £2.1 billion compared to £1.0 billion at 31 December 1999. The funding valuation
uses conservative assumptions whereas, had the valuation been based on the actuary’s view of the median estimate basis, the
funding deficit would have been reduced to £0.4 billion. Although the market value of equity investments had increased and the
investment income and contributions received by the scheme exceeded the benefits paid by £0.3 billion in the three years ended
31 December 2002, the deficit has not improved by the same amount as the liabilities have been calculated on a more prudent
basis. As a result of the triennial funding valuation the group agreed to make employer’s contributions at a rate of 12.2% of
pensionable pay from April 2006 and annual deficiency payments of £232 million. This compared to the employer’s contribution
rate of 11.6% and annual deficiency payments of £200 million that were determined under the 1999 funding valuation.
In the year ended 31 March 2006, the group made regular contributions of £396 million (2005: £376 million). Additional
special contributions were paid for enhanced pension benefits to leavers in the year ended 31 December 2004 of £nil (2005:
£6 million). Deficiency contributions of £54 million were also made (2005: £nil) as a result of the early payment of £380 million
made in the 2004 financial year that was scheduled for payment in subsequent years.
Under the terms of the trust deed that governs the BTPS, the group is required to have a funding plan that should address the
deficit over a maximum period of 20 years. The agreed funding plan addresses the deficit over a period of 15 years. The group will
continue to make deficiency payments until the deficit is made good. The BTPS was closed to new entrants on 31 March 2001 and
the age profile of active members will consequently increase. Under the projected unit credit method, the current service cost, as a
proportion of the active members’ pensionable salaries, is expected to increase as the members of the scheme approach
retirement. Despite the scheme being closed to new entrants, the projected payment profile extends over more than 60 years.
30. EMPLOYEES
2006 2005
Year end Average Year end Average
000 000 000 000
Number of employees in the group:
UK 92.7 91.5 90.8 90.7
Non-UK 11.7 11.5 11.3 8.9
Total employees 104.4 103.0 102.1 99.6
2006 2005
Year end Average Year end Average
000 000 000 000
Number of employees in the group:
BT Retail 20.6 19.9 20.4 20.7
BT Wholesale 45.3 44.5 43.6 43.0
BT Global Services 27.8 28.7 28.4 26.0
Other 10.7 9.9 9.7 9.9
Total employees 104.4 103.0 102.1 99.6
31. SHARE BASED PAYMENT PLANS
The total charge recognised in the income statement for the year in respect of share based payment plans was £76 million
(2005: £50 million). The total value of share options and awards granted in the year ended 31 March 2006 was £64 million (2005:
£77 million).
The company has an employee share investment plan and savings-related share option plans for its employees and those of
participating subsidiaries, further share option plans for selected employees and an employee stock purchase plan for employees in
the United States. It also has several share plans for executives. All share based payment plans are equity settled and details of
these plans are provided below.
Share option plans
BT Group Employee Sharesave plans
There is an HM Revenue and Customs-approved savings related share option plan, under which employees save on a monthly
basis, over a three or five year period, towards the purchase of shares at a fixed price determined when the option is granted. This
price is usually set at a 20% discount to the market price for five year plans and 10% for three year plans. The options must be
exercised within six months of maturity of the savings contract, otherwise they lapse. Options are granted annually, usually in June.
Similar plans operate for BT’s overseas employees.
Employees may cancel sharesave options and remain employed by the group. In such cases the options so cancelled do not vest
and the monthly savings contributions are returned to the employee, with interest if applicable. Such events are accounted for by
ceasing to record a share based payments charge from the date of the employee’s withdrawal from the relevant plan. Previously
recorded compensation expense is not reversed, and no charge is made for the accelerated vesting of future options that will not
now vest.
Notes to the consolidated financial statements BT Group plc Annual Report and Form 20-F 2006 101