Aviva 2006 Annual Report Download - page 99

Overview Business review Governance Financial statements Other information
Aviva plc
Annual Report and Accounts 2006 95
Pension benefits
During the year to 31 March 2006, each of the executive directors accumulated pension benefits under the defined benefits section of
the Pension Scheme. Richard Harvey and Andrew Moss, who were subject to the pre-April 2006 Earnings Cap, ceased accruing further
benefits in the scheme from that date.
Executive directors’ pension arrangements
Richard Andrew Philip Patrick
Harvey1Moss2Scott3Snowball3
£’000 £’000 £’000 £’000
Accrued annual pension at 1 January 2006 527 17 343 231
Transfer of UURB in excess of Lifetime Allowance (458) – – –
Increase in accrued annual pension during the year as a result of inflation 4 – 12 8
Augmentation of benefits – – – 20
Adjustment to accrued annual pension as a result of salary increase relative to inflation 2 – 6 13
Increase in accrued annual pension as a result of additional service – 3 – 17
Accrued annual pension at 31 December 2006475 20 361 289
Employee contributions during the year510 6 27 27
Transfer value of accrued pension at 31 December 200567,681 166 4,357 3,465
Transfer value of accrued pension at 31 December 200661,252 231 5,236 4,833
Change in transfer value during the period less employee contributions6(6,433) 61 852 1,341
Age at 31 December 2006 (years) 56 48 52 56
Notes
1. Mr Harvey was subject to the HMRC Earnings Cap; hence a large part of the liability to pay his pension fell outside the Pension Scheme and was provided by the Company
through an UURB. In line with material changes affecting pensions which became effective from 6 April 2006 the Company crystallised the value of its liability for Mr Harvey’s
UURB in excess of the LTA and transferred £11.6 million, being the actuarially calculated, and independently reviewed, value of the pension crystallised, into an EFRBS.
As a result Mr Harvey’s pension benefit, post March 2006 is £75,000 pa. and subject to increase in line with deferred pensions (the lower of the increase in the Retail Prices
Index or 5%) subject to the LTA. In addition Mr Harvey is entitled to a pension benefit of cNZ$25,000 pa from a New Zealand defined benefit scheme in respect of his service
with the Group’s former operations in that country. In calculating the actuarial value of the amount to be transferred to the EFRBS an appropriate reduction was made to
reflect the benefit of his New Zealand pension.
The amount of the transfer of £11.6 million to the EFRBS was accounted for as follows:
–Amount provided on the Company’s balance sheet for Richard Harvey as part of the IAS 19 charge at 31 March 2006, immediately prior to the change on 6 April 2006
is £10.8 million.
–Less the amount of £700,000 transferred to the Pension Scheme to provide a pension up to the LTA.
–The balance of £1.5 million was charged to the profit and loss account to take account of the increase in pension which would have been payable on his basic pay increase
at 1 April 2006 (amount of pension increase £67,000 pa).
2. Mr Moss ceased accrual in the pension scheme after 31 March 2006 and as a result his pension benefit, post March 2006 is c£20,000 pa and subject to increase in line with
deferred pensions (the lower of the increase in the Retail Prices Index or 5%) subject to the LTA.
3. Mr Snowball and Mr Scott have been accruing benefits in the Pension Scheme since beforeJune 1989 and therefore were not subject to HMRC’s Earnings Cap and can
continue to accrue benefits in the Pension Scheme, which they did throughout 2006. For a number of years Mr Snowball had been accruing additional benefits which were
due to accrue uniformly up to his normal retirement date in 2010. Mr Snowball’sbenefits wereaugmented to accrue in full in 2006, to reflect his increased duties following a
restructuring of the UK businesses when no change was made to any other element of his remuneration. A payment of £429,000 was made into the pension scheme to fund
this and therefore that part of the annual accrual ceased.
4. The “accrued pension” is the amount of annual pension to which the directors would have been entitled at age 60 had they left service at 31 December 2006.
5. Contributions of 5% of salary aremade by Mr Scott and Mr Snowball towards their pension. As Mr Harvey and Mr Moss ceased accruing benefits in the Pension Scheme from
March 2006 their 5% contributions ceased from that date and therefore the amounts disclosed are in relation to the period prior to that date.
6. The change in the transfer values over the year include the effect of changes made by the Trustee of the Pension Scheme to the assumptions used in respect of the market
value of future investment returns and mortality. The significant reduction in relation to Mr Harvey reflects the reduction in his accrued pension benefit to £75,000 pa
as described in note 1 above. Transfer values represent the estimated liability on the Scheme to pay the stated level of benefits. They are not sums paid, or due, to a director
and do not represent the true cost of providing the pension benefit.
7. No former directors received any increase in retirement benefits in excess of the amount to which they were entitled on the later of the date when the benefits first became
payable on 31 March 1997.