Barclays 2015 Annual Report Download - page 326

324 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Notes to the financial statements
Employee benefits
35 Pensions and post retirement benefits continued
Income statement charge
2015
£m
2014
£m
2013
£m
Current service cost 303 324 371
Net finance cost 42 78 55
Past service cost (434) (5) 4
Settlements 1 (15) (3)
Total (88) 382 427
Past Service costs includes a £429m (2014: nil; 2013: nil) gain on valuation of a component of the defined retirement benefit liability.
Balance sheet reconciliation 2015 20 14
Total
£m
Of which
relates to
UKRF
£m
Total
£m
Of which
relates to
UKRF
£m
Benefit obligation at beginning of the year (30,392) (27,931) (27,568) (25,093)
Current service cost (303) (234) (324) (258)
Interest costs on scheme liabilities (1,147) (1,010) (1,261) (1,101)
Past service cost 434 429 5 2
Settlements – – 83 –
Remeasurement gain/(loss) – financial 1,161 1,121 (2,493) (2,382)
Remeasurement loss – demographic (159) (160) (370) (340)
Remeasurement gain – experience 609 611 407 418
Employee contributions (36) (2) (35) (2)
Benefits paid 1,172 1,021 999 825
Exchange and other movements 382 128 165 –
Benefit obligation at end of the year (28,279) (26,027) (30,392) (27,931)
Fair value of scheme assets at beginning of the year 28,874 26,827 25,743 23,661
Interest income on scheme assets 1,105 979 1,183 1,042
Employer contribution 689 586 347 241
Settlements – – (68) –
Remeasurement – return on scheme assets greater than discount rate (476) (446) 2,736 2,705
Employee contributions 36 2 35 2
Benefits paid (1,172) (1,021) (999) (825)
Exchange and other movements (304) (98) (103) 1
Fair value of scheme assets at the end of the year 28,752 26,829 28,874 26,827
Net surplus/(deficit) 473 802 (1,518) (1,104)
Irrecoverable surplus (effect of asset ceiling) (60) – – –
Net recognised assets/(liabilities) 413 802 (1,518) (1,104)
Retirement benefit assets 836 802 56 –
Retirement benefit liabilities (423) – (1,574) (1,104)
Net retirement benefit liabilities 413 802 (1,518) (1,104)
Included within the benefit obligation was £2,050m (2014: £2,272m) relating to overseas pensions and £202m (2014: £189m) relating to other
post-employment benefits. Of the total benefit obligation of £28,279m (2014: £30,392m), £245m (2014: £286m) was wholly unfunded.
As at 31 December 2015, the UKRF scheme assets were in surplus versus IAS 19R obligations by £802m (2014: deficit of £1,104m). The movement
for the UKRF is mainly due to a £1.9bn decrease in the defined benefit obligation. The decrease in defined benefit obligation can be linked to an
increase in discount rate, membership experience, and a change to the calculation of statutory underpin for certain benefits.
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
2015
% p.a
2014
% p.a
Discount rate 3.82 3.67
Inflation rate 3.05 3.05
Rate of increase in salaries 2.55 2.55
Rate of increase for pensions in payment 2.87 2.98
Rate of increase for pensions in deferment 2.87 2.98
Afterwork revaluation rate 3.27 3.35
The UKRF discount rate assumption for 2015 was based on a variant of the standard Willis Towers Watson RATE Link model. This variant includes all
bonds rated AA by at least one of the four major ratings agencies, and assumes that yields after year 30 are flat. For 2014, the discount rate
assumption was based on the single equivalent discount rate implied by the standard Willis Towers Watson RATE Link model.