Financial Statements
10Pensions
The British Land Group of Companies Pension Scheme ('the scheme') is the principal pension scheme in the Group. It is a defined benefit scheme which is externally funded and not contracted out of SERPS. The assets of the scheme are held in a trustee-administered fund and kept separate from those of the Company. It is not planned to admit new employees to the scheme. Existing entitlements will be retained by the members, with freedom to transfer to a new Defined Contribution Scheme. Contributions to this scheme are at a flat rate of 15% of salary and paid by the Company. In certain circumstances it may be necessary to pay higher contributions when recruiting senior executives.
The Group has five other small pension schemes. The total net pension cost charged for the year was £4m (2008: £4m), of which £2m (2008: £1m) relates to defined contribution plans.
A full actuarial valuation of the scheme was carried out at 31 March 2006 and updated since then annually for accounting purposes by consulting actuaries, Hewitt Associates Ltd. The employer's contributions will be paid in the future at the rate recommended by the actuary of 48.9% pa of basic salaries. The best estimate of employer contributions expected to be paid during the year to 31 March 2010 is £4m. The major assumptions used for the actuarial valuation were:
| 2009 %pa |
2008 %pa |
2007 %pa |
2006 %pa |
2005 %pa |
|
|---|---|---|---|---|---|
| Discount rate | 5.8 | 6.0 | 5.4 | 4.9 | 5.3 |
| Salary inflation | 4.4 | 3.4 | 5.4 | 5.2 | 5.1 |
| Pensions increase | 2.9 | 3.4 | 3.2 | 3.0 | 2.9 |
| Price inflation | 2.9 | 5.6 | 3.2 | 3.0 | 2.9 |
| The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions are that a member currently aged 60 will live on average to age 89 if they are male and to age 92 if they are female. For a member who is currently 45 and retires in 2023 at age 60 the assumptions are that they will live on average for a further 30 years after retirement to age 90 if they are male and for a further 33 years after retirement to age 93 if they are female. | |||||
| Composition of scheme assets | Expected return 2009/10 % |
2009 £m |
Expected return 2008/09 % |
2008 £m |
|
| Equities | 8.0 | 40 | 7.0 | 46 | |
| Bonds | 4.8 | 28 | 5.0 | 32 | |
| Other assets | 2.1 | 1 | 5.1 | 2 | |
| Total scheme assets | 69 | 80 | |||
| The amount included in the balance sheet arising from the Group's obligations in respect of its defined benefit scheme is as follows: | |||||
| 2009 £m |
2008 £m |
2007 £m |
2006 £m |
2005 £m |
|
| Present value of defined scheme obligations | (69) | (80) | (70) | (78) | (55) |
| Fair value of scheme assets | 69 | 80 | 79 | 67 | 51 |
| Asset (liability) recognised in the balance sheet | 9 | (11) | (4) | ||
| British Land Group of companies employs a building block approach in determining the long-term rate of return on pension plan assets. Historical markets are studied and assets with higher volatility are assumed to generate higher returns consistent with widely accepted capital market principles. The assumed long-term rate of return on each asset class is set out within this note. The overall expected rate of return on assets is then derived by aggregating the expected return for each asset class over the actual asset allocation for the Scheme at 31 March 2009. | |||||
| History of experience gains and losses | 2009 £m |
2008 £m |
2007 £m |
2006 £m |
2005 £m |
| Difference between expected and actual return on scheme assets | |||||
| Amount | (18) | (5) | 8 | 2 | |
| Percentage of scheme assets | 26.3% | 6.2% | 0.4% | 12.1% | 4.7% |
| Experience gains and losses on scheme liabilities | |||||
| Amount | 8 | (1) | 4 | 2 | (1) |
| Percentage of present value on scheme liabilities | 1.7% | 1.2% | 6.1% | 1.9% | 1.8% |
| Changes in assumptions underlying the present value of scheme liabilities | 8 | (4) | 6 | (11) | (5) |
| Total actuarial (loss) gain recognised in the statement of recognised income and expense |
|||||
| Amount † | (2) | (10) | 10 | (1) | (4) |
| Percentage of present value on scheme liabilities | 3.0% | 6.2% | 14.4% | 1.4% | 7.1% |
| Deferred taxation attributable to pension movements | 2 | 1 | |||
| Pension scheme movement for the year | (2) | (10) | 8 | (1) | (3) |
†Cumulative loss recognised in the statement of recognised income and expense is £19m (2008: £17m).
Movements in the present value of defined benefit obligations were as follows:
| 2009 £m |
2008 £m |
|
|---|---|---|
| At 1 April | (80) | (70) |
| Current service cost | (2) | (3) |
| Interest cost | (5) | (4) |
| Actuarial (losses) gains | 16 | (5) |
| Benefits paid | 2 | 2 |
| At 31 March | (69) | (80) |
Amounts recognised in the income statement in respect of the defined benefit scheme are:
| 2009 £m |
2008 £m |
||
|---|---|---|---|
| Administrative expenses: | Current service cost | (2) | (3) |
| Net financing cost: | Expected return on scheme assets | 5 | 5 |
| Interest cost | (5) | (4) | |
| (2) | (2) | ||
The actual return on scheme assets was minus £13m (2008: £nil).
Movements in the fair value of the scheme assets were as follows:
| 2009 £m |
2008 £m |
|
|---|---|---|
| At 1 April | 80 | 79 |
| Expected return on scheme assets | 5 | 5 |
| Contributions by employer | 4 | 3 |
| Actuarial losses | (18) | (5) |
| Benefits paid | (2) | (2) |
| At 31 March | 69 | 80 |