Marks and Spencer 2004 Annual Report Download - page 41

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10. EMPLOYEES continued
F Executive Share Matching Plan
An Executive Share Matching Plan for senior management was approved by shareholders at the AGM in 2002 and was
introduced for the first time in July 2002. The plan currently operates for around 25 members of senior management.
Participants are required to invest one-third of any annual bonus earned in shares in the Company. The balance of the
annual bonus may be invested voluntarily.
The pre-tax value of the invested bonus will be matched by an award of shares, with the extent of the match determined
by performance conditions over a three-year period. Further details of the plan are given in the Remuneration Report on
page 17. £0.5m (last year £0.5m) has been charged against profits for this year.
11. RETIREMENT BENEFITS
The Group has adopted FRS 17 – ‘Retirement Benefits’ in full for the year ended 3 April 2004. For the year ended 29 March
2003, the Group accounted for retirement benefits under SSAP 24 and gave disclosures under the FRS 17 transitional
arrangements.
The total cost of retirement benefits for the Group was £139.0m (last year £104.8m) under FRS 17 of which £123.8m (last year
£131.8m) has been charged against operating profit and £15.2m (last year a credit of £27.0m) has been charged within other
finance charges. If the Group had continued to account for retirement benefits under SSAP 24, the total Group cost would
have been £182.2m (last year £146.4m). The SSAP 24 cost would have been higher this year when compared to last year because
it includes the impact of the full actuarial valuation of the UK defined benefit pension scheme at 31 March 2003 (see below).
Within the total Group retirement benefit cost of £139.0m, £130.7m relates to the UK defined benefit pension scheme. The
Group also operates small defined benefit pension schemes in the Republic of Ireland and at Kings Super Markets in the
USA. Retirement benefits also includes a UK post-retirement healthcare scheme and unfunded pension plans.
Contributions to non-defined benefit pension schemes in the year were £2.3m (last year £5.7m). These are included in
note (e).
(a) A full actuarial valuation of the UK defined benefit pension scheme was carried out at 31 March 2003 and showed a
deficit of £585m. This valuation, and the most recent actuarial valuations of the other post-retirement schemes, have been
updated by independent qualified actuaries to take account of the requirements of FRS 17 in order to assess the liabilities of
the schemes at 3 April 2004. The FRS 17 data for 2003 and 2002 has been restated to include the defined benefit pension
scheme at Kings Super Markets. The major assumptions used for FRS 17 purposes were:
2004 2003 2002
%%%
Rate of increase in salaries 3.5 3.5 4.0
Rate of increase in pensions in payment 2.7 2.5 2.5
Discount rate 5.6 5.5 5.9
Inflation rate 2.7 2.5 2.5
Long-term healthcare cost increases 7.7 7.5 7.5
(b) The market value of the assets in the Group defined benefit pension schemes and the expected long-term rates
of return as at 3 April 2004 were:
Expected long-term rate of return p.a. Value
2003 2002
2004 2003 2002 2004 As restated As restated
%%%£m £m £m
UK equities 8.1 8.7 7.9 974.7 757.0 1,113.4
Overseas equities 8.6 9.0 8.3 1,011.4 777.2 955.8
Government bonds 4.8 4.6 5.3 833.4 500.2 290.1
Corporate bonds (Triple B or above) 5.6 5.5 5.9 483.3 561.1 740.9
Other 3.7 4.0 4.6 331.4 43.0 9.0
Total market value of assets16.8 7.3 7.3 3,634.2 2,638.5 3,109.2
Present value of scheme liabilities (4,280.1) (3,888.1)
Pension scheme deficit (645.9) (1,249.6)
Unfunded pension plans (3.2) (3.9)
Post-retirement healthcare (20.4) (24.7)
Total post-retirement liabilities (669.5) (1,278.2)
Less: Related deferred tax asset 200.0 382.4
Net post-retirement liability (469.5) (895.8)
1The expected return on assets of 6.8% for 2004 is based on the assumption that cash of £306m (included under ‘other’) was invested in government
bonds immediately following the year end.