Barclays 2006 Annual Report Download - page 212

Notes to the accounts
For the year ended 31st December 2006
Barclays PLC
Annual Report 2006
208
35 Retirement benefit obligations (continued)
The UKRF plan assets include £27m relating to UK private equity investments (2005: £53m) and £447m relating to overseas private equity
investments (2005: £280m). These are disclosed within UK equities and Other equities respectively.
Amounts included in the fair value of plan assets include £7m (2005: £4m) relating to shares in Barclays Group, £10m (2005: £1m) relating to bonds
issued by the Barclays Group, £1m (2005: £nil) relating to other investments in the Barclays Group, and £8m (2005: £5m) relating to property
occupied by Group companies.
The expected return on assets is determined by calculating a total return estimate based on weighted average 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.
The actual return on plan assets was £1,447m (2005: £2,499m).
Actuarial gains and losses
The actuarial gains and losses arising on plan liabilities and plan assets are as follows:
UK schemes Overseas schemes Total
2006 2005 2004 2006 2005 2004 2006 2005 2004
£m £m £m £m £m £m £m £m £m
Present value of obligations (17,353) (18,252) (15,574) (970) (1,017) (587) (18,323) (19,269) (16,161)
Fair value of plan assets 16,761 15,571 13,261 745 819 436 17,506 16,390 13,697
Net deficit in the plans (592) (2,681) (2,313) (225) (198) (151) (817) (2,879) (2,464)
Actuarial (losses)/gains
– arising on benefit obligation 1,577 (2,042) (1,204) 12 (32) (62) 1,589 (2,074) (1,266)
– arising on benefit obligation
(% of plan liabilities) 9% 11% 8% 1% 3% 11% 9% 11% 8%
Actuarial gains
– arising on plan assets 423 1,599 570 25 29448 1,601 579
– arising on plan assets
(% of plan assets) 3% 10% 4% 3% –2%3% 10% 4%
Funding
The most recent triennial funding valuation of the UK Retirement Fund was performed in September 2004 and forms the basis of the Group’s
commitment that the fund has sufficient assets to make payments to members in respect of their accrued benefits as and when they fall due.
This funding valuation uses a discount rate that reflects the assumed future return from the actual asset allocation at that date, and takes into
account projected future salary increases when assessing liabilities arising from accrued service. The funding valuation is updated annually on
the basis of interim assumptions. The UK Retirement Fund recorded a funding surplus of £1.3bn as at 31st December 2006 (2005: £0.9bn).
The Group has agreed funding contributions which, in aggregate, are no less than those which are sufficient to meet the Group’s share of the cost
of benefits accruing over each year. The Group has, in the recent past, chosen to make funding contributions in excess of this, more consistent with
the IAS service cost.
Defined benefit contributions paid with respect to the UKRF were as follows:
£m
Contributions paid
2004 255
2005 354
2006 351
In 2007 the Group will follow the same funding approach, and expects to make a contribution to the UKRF of no less than £263m as per the schedule
of contributions agreed with the Trustee. The next triennial valuation will be performed in September 2007. To comply with the requirements of the
Pensions Act 2004, the Group and trustees plan to agree a scheme-specific funding target, statement of funding principles, and a schedule of
contributions which in 2008 will supersede those in place under the current actuarial funding valuation.
Excluding the UKRF, the Group is expected to pay contributions of approximately £7m to UK schemes and £44m to overseas schemes in 2007.
The Pensions Protection Fund (PPF) solvency ratio(a) for the main UK scheme as at 31st December 2006 was estimated to be 121%
(31st December 2005: 110%).
Note
(a) The PPF solvency ratio represents the funds assets as a percentage of pension liabilities calculated using a section 179 valuation model.