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39 Pensions and post retirement benefits continued
Critical accounting estimates and judgements
Actuarial valuation of the schemes’ obligation is dependent upon a series of assumptions. Below is a summary of the main financial and demographic
assumptions adopted for UKRF:
UKRF financial assumptions 2011
% p.a.
2010
% p.a.
Discount rate 4.74 5.31
Rate of increase in salaries 3.54 4.00
Inflation rate 3.04 3.50
Rate of increase for pensions in payment 2.94 3.35
Rate of increase for pensions in deferment 2.94 3.50
Afterwork revaluation ratea3.47 3.97
Expected return on scheme assets 5.00 6.30
The UKRF discount rate assumption is based on a liability-weighted rate derived from an AA corporate bond yield curve and the inflation assumption
reflects long-term expectations of RPI.
The UKRF’s post-retirement mortality assumptions are based on a best estimate assumption derived from an analysis in 2011 of Barclays own
post-retirement mortality experience which was carried out at the time of the latest triennial funding valuation, and taking account of the recent
evidence from published mortality surveys. 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% p.a. on future improvements. The table below shows how the
assumed life expectancy at 60, for members of the UKRF, has varied over the last five years:
Assumed life expectancy 2011 2010 2009 2008 2007
Life expectancy at 60 for current pensioners (years)
– Males 27.7 27.6 27.5 27.4 26.7
– Females 28.8 28.7 28.7 28.5 27.9
Life expectancy at 60 for future pensioners currently aged 40 (years)
– Males 29.1 29.7 29.6 29.5 28.0
– Females 30.4 30.7 30.6 30.5 29.1
Sensitivity analysis on actuarial assumptions
The following table shows a sensitivity analysis of the most material assumptions on the UKRF benefit obligation:
Change in key assumptions Impact on UKRF benefit
obligation
(Decrease)/
Increase
%
(Decrease)/
Increase
£bn
0.5% increase in:
– Discount rate (8.7) (1.8)
– Rate of inflation 9.1 1.9
1 year increase to life expectancy at 60 2.5 0.5
Note
a This is the assumption applied to the Afterwork cash balance element.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 263
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