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Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 88
Notes to the financial statements continued
11 Retirement benefits continued
A. Pensions and other post-retirement liabilities
2012
£m
2011
£m
Total market value of assets 6,186.4 5,398.1
Present value of scheme liabilities (6,095.1) (5,215.5)
Net funded pension plan asset 91.3 182.6
Unfunded retirement benefits (0.8) (0.9)
Post-retirement healthcare (12.5) (13.2)
Net retirement benefit asset 78.0 168.5
Analysed in the statement of financial position as:
Retirement benefit asset 91.3 182.6
Retirement benefit deficit (13.3) (14.1)
78.0 168.5
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 was agreed with the Trustees. 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 – ‘Employee Benefits’ in order to assess the liabilities of the
schemes and are as follows:
2012
%
2011
%
Rate of increase in salaries 1.0 1.0
Rate of increase in pensions in payment for service 2.3-3.1 2.4-3.4
Discount rate 4.6 5.5
Inflation rate 3.1 3.4
Long-term healthcare cost increases 7.1 7.4
The inflation rate of 3.1% reflects the Retail Price Index (RPI) rate. In line with changes to legislation certain benefits have been
calculated with reference to the Consumer Price Index (CPI) as the inflationary measure and in these instances a rate of 2.1%
(last year 2.7%) has been used. Last year, the change from RPI to CPI for deferred revaluation was included in the results,
resulting in a gain of approximately £170m, taken as an actuarial gain on the obligation.
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.£110m (last year £90m). If the inflation rate
increased by 0.1%, the IAS 19 surplus would decrease by c.£75m and if the inflation rate decreased by 0.1%, the IAS 19
surplus would increase by c.£65m.
C. Demographic assumptions
Apart from cash commutation and post retirement mortality, the demographic assumptions are in line with those adopted for
the last formal actuarial valuation of the scheme performed as at 31 March 2009. The allowance for cash commutation reflects
actual scheme experience. 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:
2012
years
2011
years
Current pensioners (at age 65) – males 22.1 22.0
– females 23.4 23.4
Future pensioners (at age 65) – males 23.2 23.2
– females 24.3 24.3
An increase of one year in the life expectancies would decrease the IAS 19 surplus by c.£200m.