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Marks and Spencer Group plc Annual report and financial statements 2011
88
Notes to the financial statements continued
11 Retirement benefits continued
A. Pensions and other post-retirement liabilities
2011
£m
2010
£m
Total market value of assets 5,398.1 4,948.6
Present value of scheme liabilities (5,215.5) (5,298.6)
Net funded pension plan asset/(deficit) 182.6 (350.0)
Unfunded retirement benefits (0.9) (0.9)
Post-retirement healthcare (13.2) (15.6)
Net retirement benefit asset/(deficit) 168.5 (366.5)
Analysed in the statement of financial position as:
Retirement benefit asset 182.6 –
Retirement benefit deficit (14.1) (366.5)
168.5 (366.5)
B. Financial assumptions
A full actuarial valuation of the UK Defined Benefit Pension Scheme was carried out at 31 March 2009 and showed a deficit of £1.3bn.
A funding plan of £800m was agreed with the Trustees. The difference between the valuation and the funding plan is expected to be
met by investment returns on the existing assets of the pension scheme. 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 IAS 19 – ‘ Benefits’ in order to assess the liabilities of the schemes:
2011
%
2010
%
Rate of increase in salaries 1.0 1.0
Rate of increase in pensions in payment for service
– pre-April 1997 2.8 2.7
– between April 1997 and July 2005 3.4 3.5
– post-July 2005 2.4 2.3
Discount rate 5.5 5.5
Inflation rate 3.4 3.6
Long-term healthcare cost increases 7.4 8.6
The inflation rate of 3.4% reflects the Retail Price Index (RPI) rate. In line with changes to legislation certain benefits have been
calculated with reference to the Consumer Price Index (CPI) as the inflationary measure and in these instances a rate of 2.7% has been
used. The change from RPI to CPI for deferred revaluation has been included in these results, resulting in a gain of approximately
£170m, taken as an actuarial gain on the obligation.
The amount of the surplus varies if the main financial assumptions change, particularly the discount rate. If the discount rate increased/
decreased by 0.1% the IAS 19 surplus would increase/decrease by c.£90m (last year £90m). If the inflation rate increased by 0.1%, the
IAS 19 surplus would decrease by c.£55m and if the inflation rate decreased by 0.1%, the IAS 19 surplus would increase by c.£45m.
C. Demographic assumptions
The demographic assumptions are in line with those adopted for the last formal actuarial valuation of the scheme (31 March 2009).
One of the most significant demographic assumptions underlying the valuation is mortality. The post-retirement mortality assumptions
are based on an analysis of the pensioner mortality trends under the scheme for the period to March 2009 updated to allow for
anticipated longevity improvements over the subsequent years. The specific mortality rates used are based on the SAPS tables,
adjusted to allow for the experience of scheme pensioners. The life expectancies underlying the valuation are as follows:
2011
years
2010
years
Current pensioners (at age 65) – males 22.0 21.9
– females 23.4 23.3
Future pensioners (at age 65) – males 23.2 23.1
– females 24.3 24.2
Employee