Barclays 2013 Annual Report Download - page 355

Note 37: Pensions and post retirement benefits continued
Balance sheet reconciliation
2013 2012a
Total
£m
Of which
relates to
UKRF
£m
Total
£m
Of which
relates to
UKRF
£m
Benefit obligation at beginning of the year (26,304) (23,643) (23,901) (21,263)
Current service cost (371) (280) (410) (309)
Interest costs on scheme liabilities (1,145) (1,003) (1,164) (991)
Past service cost (4) – 33 –
Settlements 44 – 53 –
Remeasurement loss – financial (989) (997) (1,946) (1,797)
Remeasurement loss – demographic 4 – 5 –
Remeasurement loss – experience (39) 31 22 29
Employee contributions (39) (1) (44) –
Benefits paid 905 799 865 690
Exchange and other movements 370 1183 (2)
Benefit obligation at end of the year (27,568) (25,093) (26,304) (23,643)
Fair value of scheme assets at beginning of the year 25,075 22,845 23,701 21,541
Interest income on scheme assets 1,090 974 1,174 1,027
Employer contribution 364 238 898 742
Settlements (41) – (41) –
Remeasurement – return on plan assets greater than discount rate 575 400 304 221
Employee contributions 39 1 44 –
Benefits paid (905) (799) (865) (690)
Exchange and other movements (454) 2 (140) 4
Fair value of scheme assets at the end of the year 25,743 23,661 25,075 22,845
Net (deficit)/surplus (1,825) (1,432) (1,229) (798)
Retirement Benefit Assets 133 – 53 –
Retirement Benefit Liabilities (1,958) (1,432) (1,282) (798)
Net retirement benefit (liabilities)/assets (1,825) (1,432) (1,229) (798)
Included within the benefit obligation was £2,314m (2012: £1,585m) relating to overseas pensions and £161m (2012:£164m) relating to other
post-retirement benefits. Of the total benefit obligation of £27,568m (2012: £26,304m), £298m (2012: £326m) was wholly unfunded.
As at 31 December 2013, the UKRF’s IAS 19R scheme assets were in deficit versus obligations by £1,432m (2012: deficit of £798m). The most
significant driver for this change was an increase in long term RPI inflation which was partially offset by higher corporate bond yields and asset
out performance.
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
2013
% p.a.
2012
% p.a.
Discount rate 4.46 4.31
Inflation rate 3.42 2.93
Rate of increase in salaries 2.92 3.43
Rate of increase for pensions in payment 3.32 2.88
Rate of increase for pensions in deferment 3.32 2.88
Afterwork revaluation rate 3.70 3.40
The UKRF discount rate assumption for 2013 is taken based on the single equivalent discount rate implied by the Towers Watson RATE Link model.
In 2012, an average rate derived from a Barclays AA corporate bond yield curve and the Towers Watson RATE link model was used. The impact of
this change on the UKRF Defined Benefit Obligation was a £0.4bn decrease with no impact on current year profit. The change will affect future
years’ profits and on an IAS 19 Revised basis will result in a £19m reduced charge to the 2014 income statement. It is not possible to estimate the
effects on profits after 2014.
Note
a The scheme assets and benefit obligation for 31 December 2012 have been restated to bring the DC assets and obligations for active members of the South Africa pension plan
within defined benefit accounting.
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