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Marks and Spencer Group plc Annual report and financial statements 2009 Financial statements
Notes to the financial statements
continued
92
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.
The defined benefit section operates on a final salary basis and at the year end had some 21,000 active members (last year 24,000), 57,000
deferred members (last year 58,000) and 42,000 pensioners (last year 39,000). At the year end, the defined contribution section had some
8,000 active members (last year 8,000) 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, excluding the exceptional pension credits, of £31.8m (last year £44.2m), £14.0m (last year
£28.0m) relates to the UK defined benefit section, £13.0m (last year £11.7m) to the UK defined contribution section and £4.8m (last year
£4.5m) to other retirement benefit schemes.
A. Pensions and other post-retirement liabilities
2009
£m
2008
£m
Total market value of assets 3,977.0 5,045.5
Present value of scheme liabilities (4,112.4) (4,542.3)
Net funded pension plan (deficit)/asset (135.4) 503.2
Unfunded retirement benefits (1.0) (1.3)
Post-retirement healthcare (15.8) (18.4)
Net retirement benefit (deficit)/asset (152.2) 483.5
Analysed on the balance sheet as:
Retirement benefit asset –504.0
Retirement benefit deficit (152.2) (20.5)
(152.2) 483.5
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’ in order to assess the
liabilities of the schemes:
2009
%
2008
%
Rate of increase in salaries 1.0 3.1 to 4.5
Rate of increase in pensions in payment for service
– pre April 1997 2.6 2.8
– between April 1997 and July 2005 2.9 3.5
– post July 2005 2.3 2.4
Discount rate 6.8 6.8
Inflation rate 2.9 3.5
Long-term healthcare cost increases 7.9 8.5
The amount of the deficit varies if the main financial assumptions change, particularly the discount rate. If the discount rate increased/
decreased by 0.1% the IAS 19 deficit would decrease/increase by c. £75m.
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 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: