Barclays 2011 Annual Report Download - page 263

39 Pensions and post retirement benefits
Accounting for pensions and post retirement benefits
The Group operates a number of pension schemes including defined contribution, defined benefit and post-employment benefit schemes.
Defined contribution schemes – the Group recognises contributions due in respect of the accounting period in the income statement. Any
contributions unpaid at the balance sheet date are included as a liability.
Defined benefit schemes – the Group recognises its obligation to members of the scheme at the period end, less the fair value of the scheme assets
and unrecognised actuarial gains or losses. Each scheme’s obligations are calculated using the projected unit credit method on the assumptions set
out in the note below. Scheme assets are stated at fair value as at the period end.
The Group uses the option within IAS 19 Employee Benefits to defer actuarial gains and losses over the remaining service lives of the employees.
Actuarial gains and losses comprise experience adjustments (differences between previous actuarial assumptions and what has actually occurred)
and the effects of changes in actuarial assumptions. Cumulative actuarial gains and losses, to the extent that they exceed the greater of: 10% of the
fair value of the scheme assets or 10% of the present value of the defined benefit obligation, are deferred and the excess amortised in the income
statement over the average service lives of scheme members. Gains and losses on curtailments are recognised when the curtailment occurs, which
may be when a demonstrable commitment to a reduction in benefits, or reduction in eligible employees, occurs. The gain or loss comprises any
change in the present value of the obligation, the fair value of the assets and any related unrecognised actuarial gain or loss and past service costs.
Where a scheme’s assets and its unrecognised actuarial losses exceed its obligation, an asset is recognised to the extent that it does not exceed the
present value of future contribution holidays or refunds of contributions.
Post-employment benefits – the cost of providing health care benefits to retired employees is accrued as a liability in the financial statements over
the period that the employees provide services to the Group, using a methodology similar to that for defined benefit pension schemes.
Future accounting development
From 1 January 2013, in accordance with amendments to IAS 19, the Group balance sheet will fully reflect the pension liability or asset, including any
unrecognised actuarial losses or gains. As at 31 December 2011 there were unrecognised actuarial losses of £1.7bn. In addition, the Group will
recognise interest charge or income on the net pension liability or asset, rather than the expected return on the schemes’ assets and interest cost on
the schemes’ benefit obligation. The Group will no longer recognise the amortisation of unrecognised actuarial gains or losses which in 2011 gave
rise to a charge of £0.1bn. Given these amendments the charge for 2011 would have been £0.1bn higher under the amended standard, and a
charge of £1.7bn would have been recognised in other comprehensive income.
Pension schemes
The UK Retirement Fund (UKRF) is the Group’s main scheme, representing 92% of the Group’s total retirement benefit obligations. The UKRF comprises
ten sections, the most significant of which are:
– Afterwork: comprising of a voluntary defined contribution element and a contributory cash balance defined benefit. The cash balance element is
revalued until Normal Retirement Age in line with the increase in Retail Price Index (RPI) (maximum 5%). An investment related increase of up to 2%
a year may also be added at Barclays discretion. Since 1 October 2003 the majority of new employees outside of Barclays Capital have been eligible
to join.
– The Pension Investment Plan (PIP): a defined contribution section providing benefits for Barclays Capital employees from 1 July 2001.
– The 1964 Pension Scheme: most employees recruited before July 1997 built up benefits in this non-contributory defined benefit scheme in respect of
service up to 31 March 2010. Pensions were calculated by reference to service and pensionable salary. From 1 April 2010 members became eligible to
accrue future service benefits in either Afterwork or PIP.
The costs of ill-health retirements and death in service benefits are borne by the UKRF.
Governance
The UKRF operates under trust law and is managed and administered on behalf of the members in accordance with the terms of the Trust Deed and
Rules and all relevant legislation. The Corporate Trustee is Barclays Pension Funds Trustees Limited, a private limited company incorporated on 20
December 1990 and a wholly owned subsidiary of Barclays Bank PLC. The Trustee is the legal owner of the assets of the UKRF which are held separately
from the assets of the Group.
The Trustee Board comprises six Management Directors selected by Barclays, of whom three are independent Directors with no relationship with
Barclays or the UKRF, plus three Member Nominated Directors selected from eligible active staff and pensioner members who apply for the role.
The same principles of pension governance apply to the Group’s other pension schemes, although different legislation covers overseas schemes where,
in most cases, the Group has the power to determine the funding rate.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 261
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