National Grid 2014 Annual Report Download - page 125

Strategic Report Corporate Governance Financial Statements Additional Information
22. Pensions and other post-retirement benefits continued
The Group takes advice from independent actuaries relating to the appropriateness of any key assumptions applied which include life
expectancy ofmembers, expected salary and pension increases, and inflation. It should be noted that comparatively small changes in
the assumptions used may have a significant effect on the amounts recognised in the income statement and the statement of other
comprehensive income and the net liability recognised in the statement of financial position.
Remeasurements of net retirement obligations are recognised in full in the period in which they occur in the statement of other
comprehensive income.
Risks
The DB pension obligations and other post-retirement benefit liabilities are exposed to the primary risks outlined below.
Liabilities are calculated using discount rates set with reference to yields on high-quality corporate bonds prevailing in the US and UK
debt markets and will fluctuate as yields change. Plan funds are invested in a variety of asset classes, principally: equities, government
securities, corporate bonds and property. Consequently, actual returns will differ from the underlying discount rate adopted and
therefore have an impact on the net balance sheet liability.
Changes in inflation will affect both current and future pension payments and are partially mitigated through investment in inflation
matching assets and hedging instruments.
Longevity is also a key driver of liabilities and changes in expected mortality will have a direct impact on liabilities. The liabilities are,
inaggregate, relatively mature which serves to mitigate this risk to some extent.
Each plan’s investment strategy seeks to balance the level of investment return sought with the aim of reducing volatility and risk. In
undertaking this approach reference is made both to the maturity of the liabilities and the funding level of that plan. A number of further
strategies are employed to manage underlying risks, including liability matching asset strategies, diversification of asset portfolios,
interest rate hedging and active management of foreign exchange exposure.
Amounts recognised in the statement of financial position
UK pensions US pensions US other post-retirement benefits
2014
£m
2013
(restated)1
£m
2012
(restated)1
£m
2014
£m
2013
(restated)1
£m
2012
(restated)1
£m
2014
£m
2013
(restated)1
£m
2012
(restated)1
£m
Present value of funded obligations (18,100) (18,495) (16,719) (4,566) (4,915) (4,424) (2,680) (3,020) (2,630)
Fair value of plan assets 17,409 17, 3 9 2 16,107 4,229 4,378 3,850 1,620 1,515 1,192
(691) (1,103) (612) (337) (537) (574) (1,060) (1,505) (1,438)
Present value of unfunded obligations (62) (66) (56) (186) (200) (187) –– –
Other post-employment liabilities –– – –(3) (5) (75) (83) (66)
Net defined benefit liability (753) (1,169) (668) (523) ( 740) (766) (1,135) (1,588) (1,504)
Represented by:
Liabilities (753) (1,169 ) (668) (697) (935) (921) (1,135) (1,588) (1,504)
Assets –– – 174 195 155 –– –
(753) (1,169) (668) (523) (740) (766) (1,135) (1,588) (1,504)
1. See note 1 on page 92.
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