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66 Marks and Spencer Group plc
Notes to the financial statements continued
11 RETIREMENT BENEFITS continued
B Financial assumptions
A full actuarial valuation of the UK defined benefit pension scheme was carried out at 31 March 2003 and showed a deficit of
£585m. The financial assumptions for the UK scheme 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 IAS 19 in order to assess the liabilities
of the schemes at 1 April 2006:
2006 2005
%%
Rate of increase in salaries 3.7 3.7
Rate of increase in pensions in payment for service:
– pre April 1997 2.4 2.5
– between April 1997 and July 2005 2.9 2.9
– post July 2005 2.1 2.4
Discount rate 4.9 5.5
Inflation rate 2.9 2.9
Long-term healthcare cost increases 7.9 7.9
C Demographic assumptions
The demographic assumptions are in line with those adopted for the last formal actuarial valuation of the Scheme. One of the
most significant demographic assumptions underlying the valuation is mortality. The post-retirement mortality assumptions are based
on an analysis of the pensioner mortality trends under the Scheme for the period to 2003 updated to allow for anticipated longevity
improvements over the subsequent three years. The specific mortality rates used are based on the PMA92 and PFA92 tables,
adjusted to allow for the experience of scheme pensioners. The life expectancies underlying the valuation are as follows:
2006 2005
Years Years
Current pensioners (at age 65) – males 18.8 18.6
Current pensioners (at age 65) – females 22.6 22.4
Future pensioners (at age 65) – males 19.8 19.6
Future pensioners (at age 65) – females 23.6 23.4
The next funding valuation for the UK Scheme is due to be carried out as at 31 March 2006, when the mortality trends under the
Scheme will be reviewed and the demographic assumptions updated if appropriate.
D Analysis of assets and expected rates of return
The major categories of assets as a percentage of total plan assets are:
2006 2005
%%
UK equities 17 26
Overseas equities 30 27
Government bonds 16 31
Corporate bonds (Triple B or above) 27 13
Other 10 3
100 100
The expected long-term rates of return at 1 April 2006 were:
2006 2005
%%
UK equities 8.0 8.1
Overseas equities 8.0 8.4
Government bonds 4.3 4.8
Corporate bonds (Triple B or above) 4.9 5.5
Other 4.5 3.8
6.2 6.7