Notes to the consolidated financial statements
25. Pensions and other post-retirement benefits continued
The additional disclosures regarding the Group’s defined benefit scheme as required under IAS 19 ‘Employee benefits’, and the relevant impact on the Group’s financial statements are set out below.
A qualified actuary, using revised assumptions that are consistent with the requirements of IAS 19, has updated the actuarial valuation described above as at 31 March 2009. Investments have been valued, for this purpose, at fair value.
IAS 19 actuarial assumptions:
| 31.3.2009 | 31.3.2008 | |
| Pay increases1 | 4.0% | 4.5% |
| Pension increases | 3.0% | 3.5% |
| Price inflation | 3.0% | 3.5% |
| Discount rate | 6.1% | 6.8% |
| Mortality assumptions2,3 | PCMA/PCFA00 | PMA/PFA00 |
| – Life expectancy for a member aged 60 – female (years) | – | 28.0 |
| – Life expectancy for a member aged 60 – male (years) | – | 25.2 |
| – Life expectancy for a member aged 65 – female (years) | 22.9 | – |
| – Life expectancy for a member aged 65 – male (years) | 20.6 | – |
Notes:
1. Including promotional salary scale.
2. 115% of PCMA/PCFA00 and PMA/PFA00.
3. PCMA/PCFA00 and PMA/PFA00 (year of birth with medium cohort improvements).
The fair value of the assets in the NWPS, the present value of the liabilities in the scheme and the long term expected rate of return at 31 March were:
| Long term expected rate of return 31.3.2009 % |
31.3.2009 £m |
Long term expected rate of return 31.3.2008 % |
31.3.2008 £m |
|
| Equities | 7.2 | 369.0 | 7.5 | 457.1 |
| Corporate bonds | 6.1 | 38.9 | 6.8 | 51.6 |
| Government bonds | 4.2 | 50.0 | 4.5 | 66.1 |
| Property | 5.7 | 58.7 | 6.0 | 76.3 |
| Cash | 4.0 | 1.8 | 5.3 | 15.6 |
| Loan to scheme from Company | 2.0 | (39.8) | – | – |
| Total fair value of assets | 478.6 | 666.7 | ||
| Present value of liabilities | (598.0) | (576.2) | ||
| (Deficit)/surplus | (119.4) | 90.5 |
The discount rate at 31 March 2009 has been set by reference to the yield on AA corporate bonds (AA over 15 years) at that date, extrapolated forward to a duration of 18 years which reflect the duration of the expected benefit payments. The expected rate of return on equities represents a 3% premium of the yield on long term Government bonds at 31 March 2009. The gross redemption yield on index linked UK Government stocks was 1.1%. The long term inflation rate implied by these yields is 3.1% which has been reduced by 0.1% to allow for an inflation risk premium. Mortality rates have been based on the PA00 tables, applying medium cohort adjustment of 115% loading to mortality rates based on the year of birth of membership.