Marks and Spencer 2016 Annual Report Download - page 106

Download and view the complete annual report

Please find page 106 of the 2016 Marks and Spencer annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

104
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
11 RETIREMENT BENEFITS CONTINUED
C. Demographic assumptions
The demographic assumptions are in line with those adopted for the last formal actuarial valuation of the scheme performed as at
31 March 2015. The post-retirement mortality assumptions are based on an analysis of the pensioner mortality trends under the scheme
for the period to March 2015. The specifi c mortality rates used are based on the VITA tables. The life expectancies underlying the valuation
are as follows:
2016 2015
Current pensioners (at age 65) – males 23.1 22.7
– females 24.6 24.4
Future pensioners – currently in active status (at age 65) – males 23.6 22.4
– females 26.2 25.1
Future pensioners – currently in deferred status (at age 65) – males 24.1 23.2
– females 26.4 26.0
D. Sensitivity analysis
The table below summarises the estimated impact of changes in the principal actuarial assumptions on the pension scheme surplus:
2016
£m
2015
£m
Decrease in scheme surplus caused by a decrease in the discount rate of 0.25% (90.0) (70.0)
Increase in scheme surplus caused by a decrease in the infl ation rate of 0.25% 20.0 30.0
Increase in scheme surplus caused by a decrease in the average life expectancy of one year 300.0 330.0
The sensitivity analysis above is based on a change in one assumption while holding all others constant. Therefore interdependencies
between the assumptions have not been taken into account within the analysis.
E . An alysis o f ass ets
The investment strategy of the UK defi ned benefi t scheme is driven by its liability profi le, including its infl ation-linked pension benefi ts.
In addition to its interest in the Scottish Limited Partnership (refer to note 12), the scheme invests in di erent types of bonds (including
corporate bonds and gilts) and derivative instruments (including infl ation, interest rate, cross-currency and total return swaps) in order
to align movements in the value of its assets with movements in its liabilities arising from changes in market conditions. Broadly the
scheme has hedging that covers 90% of interest rate movements and 85% of infl ation movements, as measured on the Trustees' funding
assumptions which use a discount rate derived from gilt yields.
The fair value of the total plan assets at the end of the reporting period for each category, are as follows:
2016
£m
2015
£m
Debt investments
– government bonds net of repurchase agreements14,165.7 4,180.0
– corporate bonds 1,058.2 1,211.0
– asset backed securities and structured debt 459.0 363.9
Scottish Limited Partnership interest (see note 12) 469.5 531.3
Equity investments – quoted 1,047.5 1,131.8
Equity investments – unquoted 236.7 178.0
Property 420.7 327.1
Derivatives
– interest and infl ation rate swap contracts (101.5) (127.5)
– foreign exchange contracts and other derivatives 142.0 190.9
Hedge and reinsurance funds 317.9 313.6
Cash and cash equivalents 190.5 306.2
Other 109.1 (9.8)
8,515.3 8,596.5
1. Repurchase agreements were £1,333.0m (last year £805.0m).
The fair values of the above equity and debt investments are determined based on publicly available market prices wherever available.
Unquoted investments, hedge funds and reinsurance funds are stated at fair value estimates provided by the manager of the investment
or fund. Property includes both quoted and unquoted investments. The market value of the Scottish Limited Partnership interest is based
on the expected cash fl ows and benchmark asset-backed credit spreads. It is the policy of the Scheme to hedge a proportion of interest
rate and infl ation risk. The Scheme reduces its foreign currency exposure using forward foreign exchange contracts.
At year end, the UK defi ned benefi t scheme indirectly held 169,509 (last year 199,032) ordinary shares in the Company through its
investment in UK Equity Index Funds.