Barclays 2008 Annual Report Download - page 239

3
Financial statements
30Retirement benefit obligations (continued)
Assumptions (continued)
The expected return on plan assets assumption is weighted on the basis of the fair value of these assets. Health care inflation assumptions are
weighted on the basis of the health care cost for the period. All other assumptions are weighted on the basis of the defined benefit obligation at
the end of the period.
The UK Schemes discount rate assumption is based on a liability-weighted rate derived from a AA corporate bond yield curve.
The overseas health care inflation assumptions relate to the US and Mauritius.
Mortality assumptions
The post-retirement mortality assumptions used in valuing the liabilities of the UKRF were based on the standard 2000 series tables as published by
the Institute and Faculty of Actuaries. These tables are considered to be most relevant to the population of the UKRF based on their mortality history.
These were then adjusted in line with the actual experience of the UKRF’s own pensioners relative to the standard table. An allowance has been made
for future mortality improvements based on the medium cohort projections published by the CMIB subject to a floor of 1% pa on future improvements.
On this basis the post-retirement mortality assumptions for the UKRF includes:
2008 2007 2006 2005 2004
Longevity at 60 for current pensioners (years)
– Males 27.4 26.7 25.8 25.8 25.7
– Females 28.5 27.9 29.5 29.5 29.4
Longevity at 60 for future pensioners currently aged 40 (years)
– Males 29.5 28.0 27.1 27.1 27.0
– Females 30.5 29.1 30.7 30.6 30.6
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) (1.2)
– Rate of inflation 8.8 1.3
– Rate of salary growth 1.0 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 2008:
1% increase 1% decrease
£m £m
Effect on total of service and interest cost components 1 (1)
Effect on post-retirement benefit obligation 17 (14)
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.
Barclays PLC Annual Report 2008 237