Marks and Spencer 2000 Annual Report Download - page 32

30 Marks and Spencer p.l.c.
Notes to the financial statements
10. EMPLOYEES (continued)
A Pension costs
The total pension cost for the Group was £124.5m (last year
£129.2m) of which £112.1m relates to the UK Scheme (last year
£112.3m), £2.6m relates to the Early Retirement Plan (last year
£6.6m) and £9.8m relates to overseas schemes (last year
£10.3m).
The Group operates a number of funded defined benefit
pension schemes throughout the world.
The latest actuarial valuation of the UK Scheme was carried
out at 1 April 1998 by an independent actuary using the
projected unit method. The key assumptions adopted were:
Price inflation 3.5%
Rate of increase in salaries 5.25%
Rate of increase in pensions in payment 3.5%
Rate of return on investments 8.25%
Rate of increase in dividend income 4.5%
Rate of interest applied to discount liabilities 8.25%
The latest actuarial valuation revealed a shortfall of £74m in
the actuarial value of the assets of the UK Scheme of £2,047m
compared to the actuarial liability for pension benefits.
(The market value of assets at 1 April 1998 was £2,709m.)
This represents a funding level of 97%.
The shortfall of £74m together with the unamortised
accounting deficit relating to prior periods gives a total
unamortised deficit of £169.4m. This is being amortised over
a period of 12 years from 1 April 1998, being the remaining
estimated service lives of the current scheme members.
The next actuarial valuation of the UK Pension Scheme
will be carried out as at 1 April 2001.
The total UK pension cost is analysed as follows:
2000 1999
£m £m
Normal pension cost(1) 93.9 92.7
Amortisation of deficit 14.1 14.1
Net interest elements 4.1 5.5
Total 112.1 112.3
(1) At standard contribution rate of 15.9% (last year 15.9%).
As shown in note 15, the Company has pre-paid pension costs
of £175.0m. This includes the partial funding of the deficit, offset
by the amortisation and interest elements shown above, with the
balance being pre-paid contributions to the UK Scheme.
The pension costs relating to overseas schemes have been
determined in accordance with the advice of independent
qualified actuaries.
B Post-retirement health benefits
The Company has a commitment to pay all or a proportion
of the health insurance premiums for a number of its retired
employees and their spouses, the last of whom retired in 1988.
There is no commitment in respect of current employees or
those who have retired since 1988.
At 31 March 1999, the Company re-assessed this liability in
accordance with the advice of an independent qualified actuary.
The discounted present value of £27.7m (see note 22) has been
fully provided. The valuation assumed a premium inflation of
7.5% and an after-tax discount rate of 7.0%. There is a matching
deferred taxation asset of £8.3m.
The next actuarial valuation will be carried out as at
31 March 2002.
C United Kingdom and Republic of Ireland profit sharing
schemes
The amount of profit which will be allocated this year, in the
form of ordinary shares in the Company, has been fixed at
£12.4m (last year £14.8m), representing 2.5% (last year 3%) of
the earnings of 44,145 (last year 43,550) eligible employees.
These shares are now purchased in the market: 3,154,036
ordinary shares were purchased by the Profit Sharing Trustees
in respect of the 1998/1999 allocation.
D United Kingdom employees’ save as you earn share option
scheme
Under the terms of the Scheme, the Board may offer options to
purchase ordinary shares in the Company once in each financial
year to those employees who enter into an Inland Revenue
approved Save As You Earn (SAYE) savings contract. The price
at which options may be offered is 80% of the market price
for three consecutive dealing days preceding the date of offer.
The options may normally be exercised during the period of
six months after the completion of the SAYE contract, either
three, five or seven years after entering the Scheme.
Outstanding options granted under the United Kingdom
Employees’ Save As You Earn Share Option Scheme are
as follows:
NUMBER OF SHARES OPTION
2000 1999 PRICE
Options granted
January 1992 Expired 471,247 229p
January 1993 1,390,015 3,231,374 257p
January 1994 2,559,142 3,185,585 319p
January 1995 7,146,133 8,245,124 322p
January 1996 7,189,225 8,896,346 330p
January 1997 7,209,963 10,463,786 389p
January 1998 5,901,130 10,630,202 467p
January 1999 11,282,225 15,560,138 324p
January 2000 36,500,221 – 223p