Experian 2015 Annual Report Download - page 159

Notes to the Group financial statements
for the year ended 31 March 2015 continued
33. Post-employment benefit assets and obligations continued
(c) Actuarial assumptions and sensitivities
The accounting valuations at 31 March 2015 have been based on the most recent actuarial valuations, updated by Towers Watson Limited
to take account of the requirements of IAS 19 (revised). The assumptions for the real discount rate, salary increases and mortality, used
to calculate the present value of the defined benefit obligations, all have a significant effect on the accounting valuation. Changes to
these assumptions in the light of prevailing conditions may have a significant impact on future valuations. Indications of the sensitivity
of the amounts reported at 31 March 2015 to changes in the real discount rate, life expectancy and medical costs are included below.
The methods and types of assumptions used are consistent with those used in the year ended 31 March 2014 and the absolute sensitivity
numbers are stated on a basis consistent with the methodology used in determining the accounting valuation as at 31 March 2015. The
methodology evaluates the effect of a change in each assumption on the relevant obligations, whilst holding all other assumptions constant.
(i) Principal financial actuarial assumptions
2015
%
2014
%
Discount rate 3.3 4.3
Inflation rate – based on the UK Retail Prices Index (the ‘RPI’) 2.9 3.3
Inflation rate – based on the UK Consumer Prices Index (the ‘CPI’) 1.9 2.3
Increase in salaries 3.4 3.8
Increase for pensions in payment – element based on the RPI (where cap is 5%) 2.8 3.0
Increase for pensions in payment – element based on the CPI (where cap is 2.5%) 1.5 1.7
Increase for pensions in payment – element based on the CPI (where cap is 3%) 1.7 1.9
Increase for pensions in deferment 1.9 2.3
Inflation in medical costs 5.9 6.8
The principal financial assumption is the real discount rate, being the excess of the discount rate over the rate of inflation. The discount
rate is based on the market yields on high-quality corporate bonds of appropriate currency and term to the defined benefit obligations.
In the case of the Experian Pension Scheme, the obligations are primarily in sterling and have a maturity of some 18 years. If the real
discount rate increased/decreased by 0.1%, the defined benefit obligations at 31 March 2015 would decrease/increase by approximately
US$19m and the annual current service cost would remain unchanged.
The rates of increase for pensions in payment reflect the separate arrangements applying to different groups of Experian’s pensioners.
(ii) Mortality assumptions – average life expectancy on retirement at age 65 in normal health
2015
years
2014
years
For a male currently aged 65 23.3 23.2
For a female currently aged 65 25.1 25.0
For a male currently aged 50 24.6 24.6
For a female currently aged 50 26.5 26.9
The valuation assumes that mortality will be in line with standard tables adjusted to reflect the expected experience of the Experian
Pension Scheme membership, based on analysis carried out for the 2013 actuarial valuation. A specific allowance for anticipated future
improvements in life expectancy is also incorporated. An increase in assumed life expectancy of 0.1 years would increase the defined
benefit obligations at 31 March 2015 by approximately US$4m.
(iii) Post-retirement healthcare
The valuation in respect of post-retirement healthcare benefits assumes a rate of increase for medical costs. If this rate increased/
decreased by 1.0% per annum, the obligation at 31 March 2015 would increase/decrease by US$1m and the finance expense would
remain unchanged.
158 •Financial statements Notes to the Group nancial statements