Aviva 2007 Annual Report Download - page 204
Download and view the complete annual report
Please find page 204 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.46 – Pension obligations continued
Mortality assumptions
Mortality assumptions are significant in measuring the Group’s obligations under its defined benefit schemes, particularly
given the maturity of these obligations in the material schemes. The assumptions used are summarised in the table below
and have been selected to reflect the characteristics and experience of the membership of these schemes.
The mortality tables, average life expectancy and pension duration used at 31 December 2007 for scheme members are
as follows:
Life expectancy/(pension Life expectancy/(pension
duration) at NRA of a male duration) at NRA of a female
Normal 20 years 20 years
retirement Currently younger Currently younger
Mortality table age (NRA) aged NRA than NRA aged NRA than NRA
UK PA92U08MC with a one year age
rating deduction and an allowance for 87.8 88.9 90.7 91.7
or future improvements 60 (27.8) (28.9) (30.7) (31.7)
Netherlands Coll 2003 Group Annuity Mortality
with different age corrections and an 82.8 82.8 87.1 87.1
allowance for future improvements 65 (17.8) (17.8) (22.1) (22.1)
Canada UP1994 projected to 2005, using Scale AA 83.2 83.2 86.2 86.2
65 (18.2) (18.2) (21.2) (21.2)
Ireland PA92C2020 (current pensioners)/2040 84.4 85.7 87.4 88.7
(future pensioners) 60 (24.4) (25.7) (27.4) (28.7)
The assumptions above are based on commonly-used mortality tables. In the UK, the standard mortality tables have been
adjusted to reflect recent research into mortality experience. However, the extent of future improvements in longevity is
subject to considerable uncertainty and judgement is required in setting this assumption. In the UK schemes, which are by
far the most material to the Group, the assumptions include an allowance for future mortality improvement, based on the
actuarial profession’s medium cohort projection table. The effect of assuming all members were one year younger would
increase the above schemes’ liabilities by £199 million.
The scheme liabilities have an average duration of 22 years in the UK schemes and between 14 and 28 years in the
overseas schemes.
(ii) Assumptions on scheme assets
The expected rates of return on the schemes’ assets are:
UK Netherlands Canada Ireland
2008 2007 2008 2007 2008 2007 2008 2007
Equities 7.6% 8.0% 7.2% 6.5% 7.0% 7.8% 7.4% 7.5%
Bonds 5.3% 4.75% 4.6% 4.0% 4.5% 4.5% 4.5% 4.1%
Property 6.6% 6.0% 5.8% 6.2% n/a n/a 6.4% 5.5%
Other 5.8% 5.3% 4.6% 4.0% n/a n/a 2.3% n/a
The overall rates of return are based on the expected returns within each asset category and on current asset allocations.
The expected returns are developed in conjunction with external advisers and take into account both current market
expectations of future returns, where available, and historical returns. The figures for the total expected return on scheme
assets in the following section are stated after deducting investment expenses.
(iii) Investments in Group-managed funds and insurance policies
Plan assets in the UK and Dutch schemes include investments in Group-managed funds and insurance policies with other
Group companies. Their treatment in the relevant parts of the financial statements is as follows :
Plan assets – The treatment of these funds and policies in the consolidated balance sheet is described in section
(vii) below.
Expected rates of return – Where the relevant insurance policies are in segregated funds with specific asset allocations,
their expected rates of return are included in the appropriate line in the table in section (ii) above.
Pension expense – To avoid double-counting of investment income on scheme assets and the assets backing the
underlying policies, adjustments have been made to the former in the tables in section (iv) below.
Aviva plc
Annual Report and
Accounts 2007
200
Financial
statements
Notes to the consolidated financial statements continued