Barclays 2007 Annual Report Download - page 212

Notes to the accounts
For the year ended 31st December 2007
210 Barclays PLC Annual Report 2007
30 Retirement benefit obligations (continued)
Assumptions (continued)
Sensitivity analysis
Sensitivity analysis for each of the principal assumptions used to measure the benefit obligation of the UKRF are as follows:
Impact on UKRF benefit obligation
(Decrease)/ (Decrease)/
Increase Increase
% £bn
0.5% increase to:
– Discount rate (8.5) (1.4)
– Rate of inflation 8.8 1.4
– Rate of salary growth 1.3 0.2
1 year increase to longevity at 60 2.5 0.4
Post-retirement health care
A one percentage point change in assumed health care trend rates, assuming all other assumptions remain constant would have the following effects
for 2007:
1% increase 1% decrease
£m £m
Effect on total of service and interest cost components 1.9 (1.3)
Effect on post-retirement benefit obligation 19.9 (14.6)
Assets
A long-term strategy has been set for the asset allocation of the UKRF 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 may be more volatile
than others.
The long-term strategy ensures that investments are adequately diversified. Asset 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 UKRF also employs derivative instruments, where appropriate, to achieve a desired exposure or return, or to match assets more closely
to liabilities. The value of assets shown below reflects the actual physical assets held by the scheme, with any derivative holdings reflected on a mark to
market basis. The expected return on asset assumptions, both for individual asset classes and overall, have been based on the portfolio of assets created
after allowing for the net impact of the derivatives on the risk and return profile of the holdings.
The value of the assets of the schemes, their percentage in relation to total scheme assets, and their expected rate of return at 31st December 2007 and
31st December 2006 were as follows:
2007
UK schemes Overseas schemes Total
% of Expected % of Expected % of Expected
total fair rate total fair rate total fair rate
value of of value of of value of of
Value scheme return Value scheme return Value scheme return
£m assets % £m assets % £m assets %
Equities 7,467 43 8.3 441 55 8.4 7,908 44 8.3
Bonds 7,445 43 5.1 300 38 7.6 7,745 43 5.2
Property 1,712 10 7.0 16 2 11.5 1,728 10 7.0
Derivatives (12) – 0.0 – – – (12) – –
Cash 284 2 5.1 42 5 5.6 326 1 5.2
Other 335 2 5.3 (3) – – 332 2 5.4
Fair value of plan assets a17,231 100 6.7 796 100 7.8 18,027 100 6.8
Note
aExcludes £782m (2006: £613m) representing the money purchase assets of the UKRF.