Barclays 2014 Annual Report Download - page 325

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35 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 after applying the asset ceiling test. 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.
Changes in pension scheme liabilities or assets (remeasurements) that do not arise from regular pension cost, net interest on net defined
benefit liabilities or assets, past service costs, settlements or contributions to the plan, are recognised in other comprehensive income.
Remeasurements comprise experience adjustments (differences between previous actuarial assumptions and what has actually occurred), the
effects of changes in actuarial assumptions, return on plan assets (excluding amounts included in the interest on the assets) and any changes
in the effect of the asset ceiling restriction (excluding amounts included in the interest on the restriction).
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.
Pension schemes
UK Retirement Fund (UKRF)
The UKRF is the Group’s main scheme, representing 92% of the Group’s total retirement benefit obligations. The UKRF was closed to new entrants
on 1 October 2012, and comprises ten sections, the most significant of which are:
Q Afterwork, which comprises a contributory cash balance defined benefit element, and a voluntary defined contribution element. The cash
balance element is accrued each year and revalued until Normal Retirement Age in line with the increase in Retail Price Index (RPI) (up to a
maximum of 5% p.a.). An investment related increase of up to 2% a year may also be added at Barclays’ discretion. Between 1 October 2003
and 1 October 2012 the majority of new employees outside of Investment Bank were eligible to join this section. The costs of ill-health
retirements and death in service benefits for Afterwork members are borne by the UKRF. The main risks that Barclays runs in relation to
Afterwork are more limited than in traditional final salary pension plans, being the risk of needing to make additional contributions if pre-
retirement investment returns are not sufficient to provide for the benefits. The discretionary element of the benefit provides a partial buffer
against this risk.
Q 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 Pension Investment Plan (PIP), a historic defined contribution section
which is now closed to future contributions. The risks that Barclays runs in relation to the 1964 pension section are typical of final salary
pension plans: principally, that investment returns fall short of expectations, that inflation exceeds expectations, and that retirees live longer
than expected.
Barclays Pension Savings Plan (BPSP)
Q From 1 October 2012 a new UK pension scheme, the BPSP, was established to satisfy Auto Enrolment legislation. The BPSP is a defined
contribution scheme (Group Personal Pension) providing benefits for all new Barclays UK hires from 1 October 2012, Investment Bank UK
employees who were in PIP as at 1 October 2012, and also all UK employees who were not members of a pension scheme as at that date. As a
defined contribution plan, BPSP is not subject to the same investment return, inflation or longevity risks that defined benefit plans face.
Members’ benefits reflect contributions paid and the level of investment returns achieved.
Apart from the UKRF and the BPSP, Barclays operates a number of smaller pension and long-term employee benefits and post-retirement
healthcare plans globally, the largest of which are the US and South African defined benefit schemes. Many of the plans are funded, with assets
backing the obligations held in separate legal vehicles such as trusts. Others are operated on an unfunded basis. The benefits provided the
approach to funding and the legal basis of the plans reflect their local environments.
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 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 BPSP is a Group Personal Pension arrangement which operates as a collection of personal pension plans. Each personal pension plan is a
direct contract between the employee and the BPSP provider (Legal & General Assurance Society Limited), and is regulated by the FCA.
Similar 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.
Amounts recognised
The following tables include amounts recognised in the income statement and an analysis of benefit obligations and scheme assets for all Group
defined benefit schemes. The net position is reconciled to the assets and liabilities recognised on the balance sheet. The tables include funded and
unfunded post-retirement benefits.
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