ICAP Annual Report 2009
Notes to the financial statements
Notes to the financial statements
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29. Retirement benefit obligations
The Group operates defined benefit pension schemes in the US and Germany. In the case of the schemes operating in Germany, any future obligations that the Group may incur in respect of benefits accrued to members for past service are insured with local insurance companies. The scheme in Germany is not significant in the context of the Group.
The US scheme was closed to new entrants on 1 July 1996 and no benefits have accrued to the members of the scheme in respect of their service after that date. The scheme provides for pension benefits but does not provide for post-employment medical benefits. For the purposes of determining the Group’s pension cost, the scheme is valued on an annual basis by qualified independent actuaries. The most recent valuation was as at 1 January 2009 with an update as at 31 March 2009 and used the projected unit method. The Group expects to contribute £0.5m to its defined benefit pension scheme in the year ending 31 March 2010. Details of the scheme are provided below.
The actuarial assessment was based on the following principal assumptions:
| 2009 % |
2008 % |
|
|---|---|---|
| Rate of increase in pensionable salaries | nil | nil |
| Rate of increase in pensions in payment | nil | nil |
| Discount rate | 5.8 | 5.8 |
| Inflation assumption | 3.0 | 4.0 |
The average life expectancy in years of an individual retiring at the age of 65 at the balance sheet date is as follows:
| As at 31 March 2009* Years |
As at 31 March 2008 Years |
|
|---|---|---|
| Male | 19.8 | 17.9 |
| Female | 19.8 | 21.3 |
The average life expectancy in years of an individual retiring 20 years after the balance sheet date at the age of 65 is 21.0 years (2008 – in accordance with the above table).
* Assumptions regarding mortality rates are calculated based on life expectancy tables and are no longer analysed by gender which reflects US statutory requirements.
The market value of the pension assets and liabilities of the scheme and the expected rate of return are as follows:
| Long-term rate of return expected 31 March 2009 % |
Value as at 31 March 2009 £m |
Long-term rate of return expected 31 March 2008 % |
Value as at 31 March 2008 £m |
||
|---|---|---|---|---|---|
| Equities | 8.5 | 1 | 8.5 | 1 | |
| Bonds | 6.0 | 6 | 6.0 | 4 | |
| Cash and other assets | 1.0 | 1 | 3.8 | 1 | |
| Total market value of assets | 8 | 6 | |||
| Present value of scheme liabilities | (10) | (7) | |||
| Deficit in the scheme | (2) | 1 |
The expected return on the scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected returns on equities are based on long-term rates previously experienced while yields on bonds are based on gross redemption yields at the balance sheet date.
No sensitivity analysis has been included for any changes to the assumptions used in calculating the scheme liabilities, as such changes would not have a material impact.
The changes in the present value of defined benefit obligations are as follows:
| As at 31 March 2009 £m |
As at 31 March 2008 £m |
|
|---|---|---|
| As at 1 April | (7) | (7) |
| Interest costs | (1) | – |
| Benefits paid | 1 | – |
| Exchange differences | (3) | – |
| As at 31 March | (10) | (7) |
The changes in the fair value of plan assets are as follows:
| As at 31 March 2009 £m |
As at 31 March 2008 £m |
|
|---|---|---|
| As at 1 April | 6 | 6 |
| Expected return on plan assets | 1 | – |
| Contributions by employer | 1 | 1 |
| Actuarial losses | (1) | – |
| Benefits paid | (1) | – |
| Exchange differences | 2 | (1) |
| As at 31 March | 8 | 6 |
The amounts recognised in the income statement within finance income and finance costs are as follows:
| Year ended 31 March 2009 £m |
Year ended 31 March 2008 £m |
|
|---|---|---|
| Expected return on the plan assets | 1 | – |
| Interest on plan liabilities | (1) | – |
| Net return | – | – |
The actuarial gains and losses recognised in the statement of recognised income and expense are as follows:
| Year ended 31 March 2009 £m |
Year ended 31 March 2008 £m |
|
| Actual return less expected return of the plan assets | (1) | – |
|---|---|---|
| Experience gains and losses arising on the plan liabilities | – | – |
| Changes in assumptions underlying the present value of the plan | – | – |
| Actuarial losses recognised in the statement of recognised income and expense | (1) | – |
All actuarial gains and losses are recognised immediately and there are no unrecognised gains or losses.
The history of the plan is as follows:
| Year ended 31 March 2009 £m |
Year ended 31 March 2008 £m |
Year ended 31 March 2007 £m |
Year ended 31 March 2006 £m |
Year ended 31 March 2008 £m |
|
|---|---|---|---|---|---|
| Present value of the defined benefit obligations | (10) | (7) | (7) | (8) | (8) |
| Fair value of the plan assets | 8 | 6 | 6 | 6 | 5 |
| Deficit | (2) | (1) | (1) | (2) | (3) |
| Experience adjustments on the plan liabilities | – | – | – | – | (1) |
| Experience adjustments on the plan assets | (1) | – | – | – | – |
In accordance with the transitional provisions for the amendments to IAS19, the above disclosures are determined prospectively from 1 April 2004.
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