BT 2010 Annual Report Download - page 130

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
128 BT GROUP PLC ANNUAL REPORT & FORM 20-F
29. Retirement benefit plans continued
The financial assumptions used to measure the net pension obligation of the BTPS under IAS 19 at 31 March 2010 are as follows:
Real rates (per annum) Nominal rates (per annum)
2010 2009 2008 2010 2009 2008
At 31 March %%%%%%
Rate used to discount liabilities 1.83 3.84 3.24 5.50 6.85 6.85
Average future increases in wages and salaries – – 0.75a3.60 2.90 4.28a
Average increase in pensions in
payment and deferred pensions – – – 3.60 2.90 3.50
Inflation – average increase in retail price index n/a n/a n/a 3.60 2.90 3.50
aThere is a short-term reduction in the real salary growth assumption to 0.5% for the first three years.
The assumptions about life expectancy have regard to information published by the UK actuarial profession’s Continuous Mortality
Investigation Bureau. However, due to the size of the membership of the BTPS (333,000 members at 31 December 2009) it is considered
appropriate for the life expectancy assumptions adopted to take in to account the actual membership experience. Allowance is also made
for future improvements in mortality. The BTPS actuary undertakes formal reviews of the membership experience every three years. The
IAS 19 life expectancy assumptions reflect the 2008 triennial funding valuation basis.
The average life expectancy assumptions, after retirement at 60 years of age, are as follows:
2010 2009
Number of Number of
years years
Male in lower pay bracket 25.2 24.8
Male in higher pay bracket 27.4 27.1
Female 28.1 27.7
Future improvement every 10 years 1.1 1.0
Amounts recognised in respect of defined benefit schemes
The net pension obligation is set out below:
2010 2009
Present Present
value value
Assets of liabilities Obligation Assets of liabilities Obligation
At 31 March £m £m £m £m £m £m
BTPS 35,278 (43,018) (7,740) 29,227 (33,070) (3,843)
Other schemesa151 (275) (124) 126 (256) (130)
35,429 (43,293) (7,864) 29,353 (33,326) (3,973)
Deferred tax asset 2,193 1,103
Net pension obligation (5,671) (2,870)
aIncluded in the present value of liabilities of other schemes is £54m (2009: £52m) related to unfunded schemes.
Amounts recognised in the income statement in respect of the group’s pension schemes were as follows:
2010 2009 2008
Year ended 31 March £m £m £m
Current service cost (including defined contribution schemes) 304 544 626
Total operating charge 304 544 626
Expected return on pension scheme assets (1,932) (2,621) (2,448)
Interest expense on pension scheme liabilities 2,211 2,308 2,028
Net finance expense (income) 279 (313) (420)
Total recognised in the income statement 583 231 206