Marks and Spencer 2005 Annual Report Download - page 44

42 MARKS AND SPENCER GROUP PLC
Notes to the financial statements continued
10 EMPLOYEES continued
G Fair value of share awards
As part of the Group’s preparation for the transition to International Financial Reporting Standards (IFRS), the Group intends to apply IFRS 2 -
‘Share Based Payments’, to share scheme awards granted before 7 November 2002. IFRS 2 requires the disclosure of the fair values of
share based awards granted prior to 7 November 2002 before the formal adoption of IFRS. Details are given below of the fair values of
all grants prior to 7 November 2002 that will impact the consolidated profit and loss account, prepared under IFRS, for the period ended
2 April 2005, the comparative period for IFRS implementation.
Vesting Fair Value of individual
period award at grant date
Date of award Scheme (years) (pence)
25 November 1997 Save As You Earn 7 221.8
25 November 1998 Save As You Earn 7 120.8
24 November 1999 Save As You Earn 7 62.7
24 November 1999 Save As You Earn 5 64.3
22 November 2000 Save As You Earn 7 55.8
22 November 2000 Save As You Earn 5 59.7
29 June 2001 Executive Share Option 3 76.5
12 July 2001 Executive Share Option 3 72.4
21 November 2001 Save As You Earn 5 120.9
21 November 2001 Save As You Earn 3 117.0
06 December 2001 Executive Share Option 3 114.8
25 June 2002 Executive Share Option 3 116.0
12 July 2002 Restricted Share Plan 3 308.0
30 July 2002 Executive Share Matching Plan 3 452.7
11 RETIREMENT BENEFITS
The Group adopted FRS 17 – ‘Retirement Benefits’ in full in 2004.
The total cost of retirement benefits for the Group was £84.8m (last year £139.0m) of which £103.2m (last year £123.8m) has been
charged against operating profit, £7.0m (last year £nil) has been credited within profit on sale of operations and £11.4m (last year a
charge of £15.2m) has been credited within other finance charges.
The charge against operating profit this year includes a £14.0m credit (of which £11.0m has been included within exceptional items) in
respect of curtailment gains in the UK defined benefit pension scheme. Excluding these curtailment gains, the charge against operating
profit would have been £117.2m.
Within the total Group retirement benefit cost of £84.8m, £74.0m relates to the UK defined benefit pension scheme. The Group also
operates small defined benefit pension schemes in the Republic of Ireland and at Kings Super Markets in the USA. Retirement benefits
also include a UK post-retirement healthcare scheme and unfunded pension plans.
Contributions to non-defined benefit pension schemes in the year were £6.5m (last year £2.3m).
A Financial assumptions
A full actuarial valuation of the UK defined benefit pension scheme was carried out at 31 March 2003 and showed a deficit of £585m. The
demographic assumptions were reviewed and updated at that time. The financial assumptions for the UK scheme and the most recent
actuarial valuations of the other post-retirement schemes have been updated by independent qualified actuaries to take account of the
requirements of FRS 17 in order to assess the liabilities of the schemes at 2 April 2005:
2005 2004 2003
%%%
Rate of increase in salaries 3.7 3.5 3.5
Rate of increase in pensions in payment12.6 2.7 2.5
Discount rate 5.5 5.6 5.5
Inflation rate 2.9 2.7 2.5
Long-term healthcare cost increases 7.9 7.7 7.5
1For 2005 it has been assumed that pension increases will not be above the increases guaranteed in the scheme rules.