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70 MARKS AND SPENCER GROUP PLC
Notes to the financial statements
continued
11 Retirement benefits
The Group provides pension arrangements for the benefit of its UK employees through the Marks & Spencer UK Pension
Scheme. This has a defined benefit section, which was closed to new entrants with effect from 1 April 2002, and a defined
contribution section which has been open to new members with effect from 1 April 2003. Further details of the pension scheme
can be found on page 34.
The defined benefit section operates on a final salary basis and at the year end had some 24,000 active members (last year
27,000), 58,000 deferred members (last year 57,000) and 39,000 pensioners (last year 37,000). At the year end, the defined
contribution section had some 8,000 active members (last year 7,000) and some 1,000 deferred members (last year 1,000).
The Group also operates a small funded defined benefit pension scheme in the Republic of Ireland. Retirement benefits also
include a UK post-retirement healthcare scheme and unfunded retirement benefits.
Within the total Group retirement benefit cost of £44.2m, excluding the exceptional pension credit, (last year £91.1m) £28.0m
(last year £78.0m) relates to the UK defined benefit section, £11.7m (last year £8.6m) to the UK defined contribution section
and £4.5m (last year £4.5m) to other retirement benefit schemes.
A Pensions and other post-retirement liabilities
2008 2007
£m £m
Total market value of assets 5,045.5 5,227.5
Present value of scheme liabilities (4,542.3) (5,487.0)
Net funded pension plan asset/(deficit) 503.2 (259.5)
Unfunded retirement benefits (1.3) (1.2)
Post-retirement healthcare (18.4) (22.6)
Net retirement benefit asset/(deficit) 483.5 (283.3)
Analysed on the balance sheet as:
Retirement benefit asset 504.0 –
Retirement benefit deficit (20.5) (283.3)
483.5 (283.3)
B Financial assumptions
A full actuarial valuation of the UK defined benefit pension scheme was carried out at 31 March 2006 and showed a deficit of
£704.0m. 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 – ‘Retirement
Benefits’ and IFRIC 14 – ‘The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’ in order
to assess the liabilities of the schemes.
2008 2007
%%
Rate of increase in salaries 3.1 to 4.5 3.7
Rate of increase in pensions in payment for service
– pre-April 1997 2.8 2.6
– between April 1997 and July 2005 3.5 3.0
– post-July 2005 2.4 2.3
Discount rate 6.8 5.3
Inflation rate 3.5 3.0
Long-term healthcare cost increases 8.5 8.0
The amount of the surplus varies if the main financial assumptions change, particularly the discount rate. If the discount rate
increased/decreased by 0.1% the IAS 19 surplus would increase/decrease by c.£100m.
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 March 2006 updated to allow for anticipated
longevity improvements over the subsequent year. 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:
2008 2007
years years
Current pensioners (at age 65) – males 21.0 21.0
– females 23.5 23.5
Future pensioners (at age 65) – males 21.9 21.9
– females 24.3 24.3