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vii Pension costs continued
The benefit obligation and pension cost for the main pension scheme were determined using the following assumptions
at 1 January 2003, 2004 and 2005:
2005
per annum
%
2004
per annum
%
2003
per annum
%
Discount rate 5.3 5.5 5.6
Rate of future pay increases 3.6 3.6 3.8
Rate of future pension increases 2.6 2.6 2.25
Contributions expected to be paid to the plan during the next fiscal year are estimated at £459 million.
Estimated future benefit payments are as follows:
£m
Year ending 31 March 2006 1,392
Year ending 31 March 2007 1,432
Year ending 31 March 2008 1,477
Year ending 31 March 2009 1,532
Year ending 31 March 2010 1,598
1 April 2010 to 31 March 2015 9,039
Changes in scheme assets 2005 2004
£m £m
Fair value of scheme assets at the beginning of the year 26,675 22,757
Actual return on scheme assets 3,419 4,195
Employer’s contributions
a
382 1,026
Employees’ contributions 50 148
Other changes 75
Benefits paid or payable (1,364) (1,456)
Fair value of scheme assets at the end of the year 29,169 26,675
Funded status under US GAAP 2005 2004
£m £m
Projected benefit obligation in excess of scheme assets (5,167) (5,773)
Unrecognised prior service costs
b
55 79
Other unrecognised net actuarial losses 2,577 3,419
Net amount recognised under US GAAP (2,535) (2,275)
a
The employer’s contributions for the year ended 31 March 2005 includes special contributions of £6 million paid in June 2004 (2004 – £362 million paid
in December 2003 and £380 million paid in March 2004).
b
Unrecognised prior service costs on scheme benefit improvements are being amortised over periods of 15 or 16 years commencing in the years of the
introduction of the improvements.
Asset allocation
The Trustees of the main pension scheme approve the target asset allocation as well as deviation limits. The objective
of the investment activities is to maximise investment return within an acceptable level of risk, taking into consideration
the liabilities of the main pension scheme.
Year ended 31 December 2004
Fair value
£bn %
Target
%
Equities 20.2 69 63
Fixed interest bonds 4.4 15 16
Index linked securities 2.7 9 9
Property 1.9 7 12
29.2 100 100
Year ended 31 December 2003
Fair value
£bn %
Target
%
Equities 17.1 65 65
Fixed interest bonds 3.9 15 15
Index linked securities 2.1 8 8
Property 3.2 12 12
26.3 100 100
United States Generally Accepted Accounting Principles BT Group plc Annual Report and Form 20-F 2005 119