Barclays 2009 Annual Report Download - page 241

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 239
30 Retirement benefit obligations continued
Assumptions
Obligations arising under defined benefit schemes are actuarially valued using the projected unit credit method. Under this method, where a defined
benefit scheme is closed to new members, such as in the case of the 1964 Pension Scheme, the current service cost expressed as a percentage of salary
is expected to increase in the future, although this higher rate will be applied to a decreasing payroll. The latest actuarial IFRS valuations were carried out
as at 31st December using the following assumptions:
UK schemes Overseas schemes
2009 2008 2009 2008
% p.a. % p.a. % p.a. % p.a.
Discount rate 5.61 6.75 7.53 7.09
Rate of increase in salaries 4.26 3.66 5.49 5.93
Inflation rate 3.76 3.16 3.78 3.98
Rate of increase for pensions in payment 3.56 3.06 3.27 3.17
Rate of increase for pensions in deferment 3.76 3.16 2.81 4.37
Initial health care inflation 7.00 8.00 8.50 9.00
Long-term health care inflation 5.00 5.00 5.00 5.01
Expected return on plan assets 6.70 6.80 7.44 7.95
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 an AA corporate bond yield curve.
The overseas health care inflation assumptions relate to the US.
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 Continuous Mortality Investigation Bureau subject to a floor of 1% pa
on future improvements. On this basis the post-retirement mortality assumptions for the UKRF includes:
2009 2008 2007 2006 2005
Longevity at 60 for current pensioners (years)
– Males 27.5 27.4 26.7 25.8 25.8
– Females 28.7 28.5 27.9 29.5 29.5
Longevity at 60 for future pensioners currently aged 40 (years)
– Males 29.6 29.5 28.0 27.1 27.1
– Females 30.6 30.5 29.1 30.7 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) (1.6)
– Rate of inflation 7.7 1.5
1 year increase to longevity at 60 2.5 0.5
Following the amendment to the UKRF Trust Deed on 10th September 2009, the UKRF benefit obligation is not sensitive to future salary growth.