BT 2016 Annual Report Download - page 193

199
Overview The Strategic Report Governance Financial statements Additional information
20. Retirement benefit plans
Background
The group has both defined benefit and defined contribution retirement benefit plans. The group’s main plans are in the UK and the
largest by membership is the BT Pension Scheme (BTPS) which is a defined benefit plan that was closed to new entrants on 31 March
2001. After that date new entrants to BT in the UK have been able to join a defined contribution plan, currently the BT Retirement Saving
Scheme (BTRSS), a contract-based arrangement. EE operates the EE Pension Scheme (EEPS), which has a defined benefit section that was
closed to future benefit accrual in 2014 and a defined contribution section which is open to new joiners.
Defined contribution plans
A defined contribution plan is a pension arrangement where the benefits are linked to contributions paid, the performance of
each individual’s chosen investments and the form in which individuals choose to take their benefits. Contributions are paid into an
independently administered fund. The income statement charge in respect of defined contribution plans represents the contribution
payable by the group based upon a fixed percentage of employees’ pay. The company has no exposure to investment and other experience
risks.
Defined benefit plans
A defined benefit plan is a pension arrangement where participating members receive a pension benefit at retirement determined by the
plan rules dependent on factors such as age, years of service and pensionable pay and is not dependent upon actual contributions made
by the company or members. The income statement service cost in respect of defined benefit plans represents the increase in the defined
benefit liability arising from pension benefits earned by active members in the current period. The group is exposed to investment and
other experience risks and may need to make additional contributions where it is estimated that the benefits will not be met from regular
contributions, expected investment income and assets held.
Group income statement
The expense or income arising from all group retirement benefit arrangements recognised in the group income statement is shown below.
Year ended 31 March
2016
£m
2015
£m
2014
£m
Recognised in the income statement before specific items
Current service cost:
– defined benefit plans 301 296 312
– defined contribution plans 193 176 151
Past service credit –(5)a–
Total operating expense 494 467 463
Net interest expense on net pensions deficit included in specific items (note 8) 221 292 235
Total recognised in the income statement 715 759 698
a Past service credit relates to various pension plans operating outside the UK.
Group statement of comprehensive income
Remeasurements of the net defined benefit obligation are recognised in full in the group statement of comprehensive income in the
year in which they arise. These comprise the impact on the defined benefit liability of changes in demographic and financial assumptions
compared with the start of the year, actual experience being different to those assumptions and the return on plan assets above the
amount included in the net pension interest expense.
Group balance sheet
The net pension obligation in respect of defined benefit plans reported in the group balance sheet is set out below.
2016 2015
At 31 March
Assets
£m
Present value
of liabilities
£m
Deficit
£m
Assets
£m
Present value
of liabilities
£m
Deficit
£m
BTPS 43,121 (49,119) (5,998) 43,386 (50,715) (7,329)
EEPS 596 (710) (114) –––
Other plansa251 (521) (270) 241 (495) (254)
Retirement benefit obligation 43,968 (50,350) (6,382) 43,627 (51,210) (7,583)
Adjustments due to effect of asset ceilingb– –
Deferred tax asset 1,147 1,481
Net pension obligation (5,235) (6,102)
a Included in the present value of liabilities of other plans is £90m (2014/15: £80m) related to unfunded pension arrangements.
b There is no limiting effect of the asset ceiling as any accounting surplus arising in individual plans is deemed to be recoverable due to the economic benefits available in the form of future refunds or
reductions to future contributions.