BT 2012 Annual Report Download - page 137

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134 Financial statements
Notes to the consolidated financial statements
The results of the two most recent triennial valuations which have been performed using the same methodology were:
June December
2011 2008
valuation valuation
£bn £bn
BTPS liabilities (40.8) (40.2)
Market value of BTPS assets 36.9 31.2
Funding deficit (3.9) (9.0)
Percentage of accrued benefits covered by BTPS assets at valuation date 90.4% 77.6%
Percentage of accrued benefits on a solvency basis covered by the BTPS assets at the valuation date 66.0% 57.0%
The reduction of the funding deficit in the period from 31 December 2008 to 30 June 2011 reflects an increase in scheme assets due to deficit
contribution payments totalling £1.6bn and strong investment performance of 10.1% per year. The liabilities have increased due to a lower
discount rate which was partly offset by the impact of the announcement in July 2010 by the Government that CPI, rather than RPI, will be used
as the basis for determining the rate of inflation for the statutory minimum rate of revaluation and indexation of occupational pension rights.
Key assumptions – funding valuation
These valuations were determined using the following prudent long-term assumptions:
Nominal rates (per year) Real rates (per year)a
June December June December
2011 2008 2011 2008
valuation valuation valuation valuation
%%%%
Discount rate
– Pre-retirement liabilities 6.35 6.76 3.05 3.65
– Post retirement liabilities 4.90 5.21 1.65 2.15
Average long-term increase in RPI 3.20 3.00 – –
Average long-term increase in CPI 2.20 n/a (1.0) n/a
Average future increases in wages and salaries 3.20 3.00 – –
Average increase in pensions linked to RPI 3.20 3.00 – –
Average increase in pensions linked to CPI 2.20 n/a (1.0) n/a
aThe real rate is calculated relative to RPI inflation and is shown as a comparator.
The average life expectancy assumptions, after retirement at 60 years of age, are as follows:
June December
2011 2008
valuation valuation
Number of Number of
At date of valuation years years
Male in lower pay bracket 26.0 25.5
Male in higher pay bracket 27.8 27.7
Female 28.5 28.3
Average improvement for a member retiring at age 60 in 10 years’ time 1.2 1.1
Payments made to the BTPS
2012 2011
Year ended 31 March £m £m
Ordinary contributions 171 266
Deficit contributions 2,000 1,030
Total contributions in the year 2,171 1,296
The group expects to contribute approximately £550m to the BTPS in 2013, comprising ordinary contributions of £225m and deficit contributions
of £325m. In 2012 ordinary contributions were lower compared with 2011 due to a deduction to recover overpayments made in an earlier year.
20. Retirement benefit plans continued
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