Aviva 2009 Annual Report Download - page 231

229
Performance review
Aviva plc Notes to the consolidated financial statements continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
47 – Pension obligations
This note describes the Group’s pension arrangements for its employees and explains how our obligations to these schemes
are calculated.
(a) Introduction
The Group operates a large number of defined benefit and defined contribution pension schemes around the world. The only
material defined benefit schemes are in the UK, the Netherlands, Canada and Ireland and, of these, the main UK scheme is by
far the largest.
The assets of the main UK, Irish and Canadian schemes are held in separate trustee-administered funds to meet long-term
pension liabilities to past and present employees. In the Netherlands, the main scheme is held in a separate foundation which
invests in the life funds of the Group. In all schemes, the appointment of trustees of the funds is determined by their trust
documentation, and they are required to act in the best interests of the schemes’ beneficiaries. The long-term investment
objectives of the trustees and the employers are to limit the risk of the assets failing to meet the liabilities of the schemes
over the long term, and to maximise returns consistent with an acceptable level of risk so as to control the long-term costs
of these schemes.
A full actuarial valuation of each of the defined benefit schemes is carried out at least every three years for the benefit of
scheme trustees and members. Actuarial reports have been submitted for each scheme within this period, using appropriate
methods for the respective countries on local funding bases.
(b) Membership
The number of scheme members at 31 December 2009 was as follows:
United Kingdom Netherlands
2009
Number
2008
Number
2007
Number
2009
Number
2008
Number
2007
Number
Active members
Deferred members
Pensioners
8,164
53,221
28,878
9,972
53,376
27,749
10,532
53,953
27,176
4,637
6,155
3,119
4,920
5,739
3,014
5,048
5,015
2,815
Total members 90,263 91,097 91,661 13,911 13,673 12,878
Canada Ireland
2009
Number
2008
Number
2007
Number
2009
Number
2008
Number
2007
Number
Active members
Deferred members
816
558
889
529
960
617
1,143
877
1,180
842
1,157
830
Pensioners 1,291 1,280 1,350 684 682 674
Total members 2,665 2,698 2,927 2,704 2,704 2,661
(c) Main UK scheme
In the UK, the Group operates two main pension schemes, the Aviva Staff Pension Scheme (ASPS) and the smaller RAC (2003)
Pension Scheme. New entrants join the defined contribution section of the ASPS, as the defined benefit section is closed to new
employees. This scheme is operated by a trustee company, with 11 trustee directors, comprising representatives of the employers,
staff, pensioners and an independent trustee (referred to below as the trustees).
(i) Defined benefit section of the ASPS
The Company works closely with the trustees who are required to consult it on the funding of the scheme and its investment
strategy. Following each actuarial valuation, the Company and the trustees agree the level of contributions needed and funding
levels are then monitored on an annual basis.
At 31 March 2009, the date of the last actuarial valuation, this section of the scheme had an excess of obligations over
available assets, on a funding basis, which uses more prudent assumptions than are required for reporting under IAS 19, of
£3.0 billion. At 31 December 2009, this figure is estimated to have fallen to £2.7 billion. The Company and the trustees are in
advanced stages of finalising a long-term funding plan over which it will aim to eliminate the funding deficit. Under the current
proposals, deficit funding payments in 2010 are expected to be £365 million.
The employing companies’ contributions to the defined benefit section of the ASPS throughout 2009 were 41% of employees’
pensionable salaries, together with the cost of redundancies during the year, and additional deficit funding payments totalling
£52 million. As this section of the scheme is closed to new entrants and the contribution rate is determined using the projected
unit credit method, it is expected that the percentage cost of providing future service benefits will continue to increase as the
membership ages, leading to higher pension costs, and the number of members falls, leading to a higher charge per member.
Pending finalisation of the funding plan above, the employers’ contribution rate for 2010 has been increased to 43% of
pensionable salaries, with expected service funding contributions under the current proposals increasing to £130 million. Active
members of this section of the ASPS contributed between 5% and 7.5% of their pensionable salaries, increasing to between 6%
and 10% from 1 April 2010.
Financial statements IFRS