National Grid 2007 Annual Report Download - page 53

National Grid Electricity Transmission plc Annual Report and Accounts 2006/07
8. Retirement benefit obligations
2007
2006
£m
£m
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
(1,812)
(1,711)
Fair value of plan assets
1,336
1,334
(476)
(377)
Present value of unfunded obligations
(12)
(13)
Net Liability in the balance sheet
(488)
(390)
2007
2006
£m
£m
Changes in the present value of the defined benefit obligation:
Opening defined benefit obligation 1,724 1,583
Current service cost
20
17
Interest cost
83
84
Actuarial losses
67
125
Losses on curtailments 32
Losses on settlements
-
-
Employee contributions
6
6
Benefits paid
(81)
(78)
Net transfers out
1
(7)
Other augmentations 1-
Net decrease in liabilities from disposals
-
(8)
Closing defined benefit obligation
1,824
1,724
Changes in the fair value of plan assets:
Opening fair value of plan assets
1,334
1,161
Expected return on plan assets
84
76
Actuarial (losses)/gains
(26)
168
Employer contributions
18
15
Employee contributions
6
6
Benefits paid
(81)
(78)
Net transfers out/(in)
1
(7)
Net decrease in assets from disposals
-
(7)
Closing fair value of plan assets
1,336
1,334
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Substantially all of the Group's employees are members of the Electricity Supply Pension Scheme which is a defined
benefit pension scheme.
The Electricity Supply Pension Scheme provides final salary defined benefits on a funded basis. The assets of the scheme
are held in a separate trustee administered fund. The scheme is divided into sections, one of which is the National Grid
Electricity Tranmission's section. The Group's section of the scheme was closed to new entrants on 1 April 2006. It is
subject to independent valuations at least every three years, on the basis of which the qualified actuary certifies the rate of
employers' contributions, which, together with the specified contributions payable by the employees and proceeds from the
scheme's assets, are expected to be sufficient to fund the benefits payable under the scheme.
The latest full actuarial valuation as at 31 March 2007 is currently being carried out by Hewitt Bacon and Woodrow. The last
completed full actuarial valuation was carried out by Hewitt Bacon and Woodrow at 31 March 2004. The aggregate market
value of the scheme's assets as at that date was £1,110m and the value of the assets represented 80% of the actuarial
value of benefits due to members calculated on the basis of pensionable earnings and service at 31 March 2004 on an
ongoing basis and allowing for projected increases in pensionable earnings.
The results of the actuarial valuation carried out at 31 March 2004 showed that, based on long-term financial assumptions,
the contribution rate required to meet future benefit accrual was 19.1% of pensionable earnings (13.1% employers and 6%
employees). This contribution rate will be reviewed as part of the next independent actuarial valuation being carried out
currently.
It has been agreed that no funding of the deficit identified in the 2004 actuarial valuation will need to be provided to the
scheme until the outcome of the actuarial valuation at 31 March 2007 is known. At this point, the National Grid Electricity
Transmission will pay the gross amount of any deficit up to a maximum of £68m (£48m net of tax) into the scheme. Until
the 31 March 2007 actuarial valuation has been completed, National Grid Electricity Transmission has arranged for banks
to provide the trustees of the National Grid Scheme with letters of credit. The main conditions under which these letters of
credit could be drawn relate to events which would imperil the interests of the scheme, such as National Grid Electricity
Transmission plc becoming insolvent or failing to make payments into the fund.