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Marks and Spencer Group plc Annual report and financial statements 2010 Financial statements 92
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 2009 and showed a deficit of £1.3bn.
A funding plan of £800m has been agreed with the Trustees (see note 31). The difference between the valuation and the funding plan is
expected to be met by investment returns on the existing assets of the pension scheme. 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:
2010
%
2009
%
Rate of increase in salaries 1.0 1.0
Rate of increase in pensions in payment for service
– pre-April 1997 2.7 2.6
– between April 1997 and July 2005 3.5 2.9
– post-July 2005 2.3 2.3
Discount rate 5.5 6.8
Inflation rate 3.6 2.9
Long-term healthcare cost increases 8.6 7.9
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. £90m.
C. Demographic assumptions
The demographic assumptions are in line with those adopted for the last formal actuarial valuation of the scheme (31 March 2009). 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 2009 updated to allow for anticipated longevity
improvements over the subsequent years. The specific mortality rates used are based on the SAPS tables, adjusted to allow for the
experience of scheme pensioners. The life expectancies underlying the valuation are as follows:
2010
years
2009
years
Current pensioners (at age 65) – males 21.9 21.2
– females 23.3 23.6
Future pensioners (at age 65) – males 23.1 22.0
– females 24.2 24.3
D. Analysis of assets and expected rates of return
The major categories of assets as a percentage of total plan assets are:
2010
£m
2009
£m
2010
%
2009
%
Property partnership interest 631.7 529.8 13 13
UK equities 415.7 480.8 812
Overseas equities 1,283.4 644.3 26 16
Government bonds 53.9 127.2 13
Corporate bonds 2,520.8 2,278.0 51 58
Swaps1 (245.1) (214.9) (5) (5)
Cash and other 288.2 131.8 63
4,948.6 3,977.0 100 100
1 The swaps hedge interest and inflation rate exposures within the scheme’s liabilities.