Barclays 2003 Annual Report Download - page 190

Notes to the Accounts
For the Year Ended 31st December 2003
188
61 Differences between UK GAAP and US GAAP accounting principles (continued)
(c) Pensions and post-retirement benefits (continued)
The minimum liability, prior period service cost and other comprehensive income as at the Measurement Date for the pension schemes is shown in
the table below:
UKRF WPF
£m £m
Scheme assets at market value 10,943 37
Accumulated Benefit Obligation (ABO) 11,749 31
Minimum liability (excess of ABO over market value of assets) 806 (6)
(Accrued) pension cost (595) (76)
Minimum additional liability 211 –
Prior period service cost (2) –
Accumulated other comprehensive income 2003 209 –
Accumulated other comprehensive income 2002 191 –
A long-term strategy has been set for the pension plan asset allocations which comprises a mixture of equities, bonds, property and other appropriate
assets. This recognises that different asset classes are likely to produce different long-term returns, and some asset classes will be more volatile
than others.
One of the factors in the choice of a long-term strategy is to ensure that the investments are adequately diversified. The managers are permitted
some flexibility to vary the asset allocation from the long-term strategy within control ranges agreed with the Trustee from time to time.
The table below shows the percentage of the fair value of each major category as at the measurement date.
UKRF (defined benefits only) WPF
Target Target
(2004) 30/9/03 30/9/02 (2004) 30/9/03 30/9/02
%%%%%%
Equity securities 51 50 49 55 51 49
Debt securities 37 36 36 45 42 41
Property 12 11 12 – – 10
All other assets – 3 3 – 7 –
Total 100 100 100 100 100 100
The expected return on assets is determined by calculating a total return estimate based on a weighted average of estimated returns for each
asset class. Asset class returns are estimated using current and projected economic and market factors such as inflation, credit spreads and equity
risk premiums.
Employer cash contributions for the year to 31st December 2004 for the UKRF and WPF schemes are expected to be £4m and £3m respectively.
In accordance with US GAAP requirements, the actuaries for the pension plans used the following assumptions on a weighted average basis; discount
rate of 5.4% (2002: 5.3%, 2001: 6.0%), rate of compensation increase of 4.1% (2002: 3.75%, 2001: 4.0%), and expected long-term rate of return on
plan assets of 6.8% (2002: 6.8%, 2001: 7.5%).
Details of the post-retirement health care expense under UK GAAP are given in Note 4 to the accounts.
In accordance with the US GAAP requirements, the accounting for the post-retirement benefits charge assumed a discount rate of 6.25%
(2002: 6.75%, 2001: 7.25%) for US benefits and 5.4% (2002: 5.3%, 2001: 6.0%) for UK benefits on a weighted average basis.