Notes to the consolidated financial statements

25. Pensions and other post-retirement benefits continued

The Group through its subsidiary, AquaGib, also operates a non-contributory defined benefit scheme. The surplus at 31 March 2009, under local GAAP, was £0.3 million (2008: £0.2 million). The Group made contributions amounting to £0.5 million (2008: £0.6 million) to the defined benefit pension scheme.

Sensitivity to key assumptions:

IAS 1 requires disclosure of the sensitivity of the results to the methods and assumptions used.

The costs of a pension arrangement require estimates regarding future experience. The financial assumptions used for IAS 19 reporting are the responsibility of the directors of the Company. These assumptions reflect market conditions at the balance sheet date. Changes in market conditions which result in changes in the net discount rate (essentially the difference between the discount rate and the assumed rates of increases of salaries, deferred pension revaluation or pensions in payment), can have a significant effect on the value of the liabilities reported.

A reduction in the net discount rate will increase the assessed value of liabilities, as a higher value is placed on benefits paid in the future. A rise in the net discount rate will have an opposite effect of similar magnitude. The overall effect of a change in the net discount rate of 0.1% would change the liabilities by around £12.0 million.

There is also uncertainty around life expectancy for the UK population. The value of current and future pension benefits will depend on how long they are assumed to be in payment.

The disclosures have been prepared using the mortality assumptions adopted for the 2007 formal valuation – namely the PCMA/PCFA00 tables, applying a medium cohort adjustment with a 115% loading to mortality rates based on the year of birth of the membership. These assumptions imply an assumed life expectancy for a member aged 65 at 31 March 2009 of 20.6 years (2008: member aged 60 years of 25.2 years) for males and 22.9 years (2008: member aged 60 years of 28.0 years) for females.

The effect of increasing the assumed life expectancies by one year would be to increase the value of liabilities by around 2.9%.

26. Share incentive plans

Long Term Incentive Plan (LTIP)

Under the LTIP, executive directors and senior managers may receive, at the discretion of the Remuneration Committee, annual conditional awards of shares in the Company. Further details of the LTIP can be found in the directors’ remuneration report.

The following table illustrates the movements in conditional share awards during the year.

The weighted average exercise price throughout the year was £nil (2008: £nil). The fair value of conditional share awards granted during the year was £0.1 million (2008: £0.1 million).

The weighted average share price at the date of exercise for the conditional share awards is 248.08 pence (2008: 343.34 pence).

For the conditional awards outstanding as at 31 March 2009, the weighted average remaining contractual life is 1.8 years (2008: 1.7 years).