Unilever 2007 Annual Report Download - page 106

Download and view the complete annual report

Please find page 106 of the 2007 Unilever 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 148

  • 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
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

104 Unilever Annual Report and Accounts 2007
Financial statements continued
Notes to the consolidated accounts Unilever Group
20 Pensions and similar obligations (continued)
The valuations of other post-employment benefit plans generally assume a higher initial level of medical cost inflation, which falls from 9.3%
to the long-term rate within the next five years. Assumed healthcare cost trend rates have a significant effect on the amounts reported for
healthcare plans. A one percentage point change in assumed healthcare cost trend rates would have the following effect:
€ million € million
1% point 1% point
increase decrease
Effect on total of service and interest cost components 3(3)
Effect on total benefit obligation 29 (26)
The expected rates of return on plan assets were determined, based on actuarial advice, by a process that takes the long-term rates of return
on government bonds available at the balance sheet date and applies to these rates suitable risk premiums that take account of historic market
returns and current market long-term expectations for each asset class.
For the most important pension plans, representing approximately 80% of all defined benefit plans by liabilities, the assumptions used at
31 December 2007, 2006, 2005 and 2004 were:
United Kingdom Netherlands
Assumptions 2007 2006 2005 2004 2007 2006 2005 2004
Discount rate 5.8% 5.1% 4.7% 5.3% 5.5% 4.6% 4.0% 4.5%
Inflation 3.0% 2.9% 2.7% 2.8% 1.9% 1.9% 1.8% 1.8%
Rate of increase in salaries 4.5% 4.4% 4.2% 4.3% 2.4% 2.4% 2.3% 2.3%
Rate of increase for pensions in payment 3.0% 2.9% 2.7% 2.9% 1.9% 1.9% 1.8% 1.8%
Rate of increase for pensions in deferment
(where provided) 3.0% 2.9% 2.7% 2.9% 1.9% 1.9% 1.8% 1.8%
Expected long-term rates of return:
Equities 8.0% 8.0% 7.6% 8.0% 8.1% 7.6% 7.0% 7.6%
Bonds 5.0% 5.2% 4.5% 5.0% 4.7% 4.4% 3.7% 4.1%
Property 6.5% 6.5% 6.1% 6.5% 6.6% 6.1% 5.5% 6.1%
Others 6.3% 7.2% 6.7% 7.2% 4.1% 4.0% 3.7% 3.5%
Weighted average asset return 7.2% 7.3% 6.9% 7.3% 6.8% 6.6% 6.0% 6.6%
United States Germany
2007 2006 2005 2004 2007 2006 2005 2004
Discount rate 5.9% 5.8% 5.5% 5.7% 5.5% 4.6% 4.0% 4.5%
Inflation 2.3% 2.5% 2.4% 2.5% 1.9% 1.9% 1.8% 1.8%
Rate of increase in salaries 4.0% 4.0% 4.0% 4.5% 2.8% 2.6% 2.5% 2.5%
Rate of increase for pensions in payment 0.0% 0.0% 0.0% 0.0% 1.9% 1.9% 1.8% 1.8%
Rate of increase for pensions in deferment
(where provided) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Expected long-term rates of return:
Equities 7.8% 8.3% 8.0% 8.4% 8.1% 7.6% 7.0% 7.6%
Bonds 4.5% 5.2% 4.8% 4.7% 4.7% 4.4% 3.7% 4.1%
Property 6.3% 6.8% 6.5% 6.9% 6.6% 6.1% 5.5% 6.1%
Others 3.7% 4.8% 4.2% 2.1% 5.8% 3.0% 3.7% 3.7%
Weighted average asset return 6.8% 7.4% 7.0% 7.3% 6.5% 5.8% 5.3% 5.7%
Demographic assumptions, such as mortality rates, are set having regard to the latest trends in life expectancy (including expectations for future
improvements), plan experience and other relevant data. The assumptions are reviewed and updated as necessary as part of the periodic
actuarial valuation of the pension plans.
Mortality assumptions for the most important countries are based on the following post-retirement mortality tables: (i) United Kingdom: PNMA 00
and PNFA 00 with medium cohort adjustment subject to a minimum annual improvement of 1% and scaling factors of 110% for current male
pensioners, 125% for current female pensioners and 105% for future male and female pensioners; (ii) the Netherlands: GBMV (2000–2005) with
age set back of four years for males and two years for females; (iii) United States: RP2000 with a projection period of 10–15 years; and (iv)
Germany: Heubeck 1998 (Periodentafel) with a scaling factor of 85%.
These tables translate into the following years of life expectancy for current pensioners aged 65:
United United
Kingdom Netherlands States Germany
Males 21 20 19 18
Females 23 22 22 21
With regard to future improvements in life expectancy, in the UK for example, males and females currently aged 45 are assumed to have a life
expectancy of 24 years and 26 years respectively on retirement at age 65.
Assumptions for the remaining defined benefit plans vary considerably, depending on the economic conditions of the countries where they
are situated.