 |
 |
 |
Retirement benefit assets and liabilities can be analysed as follows:
|
UK |
USA |
2009 |
2008 |
|
|
|
|
Total |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Pension (liability)/asset |
(8,377) |
(872)* |
(9,249) |
42,547 |
|
Deferred tax asset/(liability) |
- |
305 |
305 |
(11,860) |
|
Net pension (liability)/asset |
(8,377) |
(567) |
(8,944) |
30,687 |
*Includes £97,000 (2008: £93,000) presented as liabilities associated with assets held for sale.
Full disclosures are provided in respect of UK defined benefit pensions and USA post-retirement benefits below.
UK
The Group operates a contributory defined benefits plan to provide pension and death benefits for the employees of Avon Rubber p.l.c. and its Group undertakings in the UK employed prior to 31 January 2003. The scheme is now closed to new entrants and will close to future accrual of benefit from 1 October 2009. The assets of the plan are held in separate trustee administered funds and are invested by professional investment managers. The trustee is Avon Rubber Pension Trust Limited, the directors of which are members of the plan. Four of the directors are appointed by the Company and two are elected by the members.
Pension costs are assessed on the advice of an independent consulting actuary using the projected unit method. The funding of the plan is based on regular actuarial valuations. The most recent finalised actuarial valuation of the plan was carried out as at 1 April 2006 when the market value of the plan’s assets was £258.2 million. The actuarial value of those assets represented 101% of the value of the benefits which had accrued to members, after allowing for future increases in salaries.
Employer contributions to the plan during the year were 8.2% of salaries, with additional payments of £25,856 per month, in respect of scheme expenses.
An updated actuarial valuation for IAS 19 purposes was carried out by an independent actuary at 30 September 2009 using the projected unit method.
The main financial assumptions used by the independent qualified actuary to calculate the liabilities under IAS 19 are set out below:
|
2009 |
2008 |
|
|
|
% p.a. |
% p.a. |
|
Inflation |
3.00 |
3.40 |
|
Rate of general long-term increase in salaries |
n/a |
3.65 |
|
Pension increases post August 2005 |
2.10 |
2.40 |
|
Pension increase April 1997 to August 2005 |
2.90 |
3.40 |
|
Pension increases pre April 1997 |
2.90 |
3.40 |
|
Discount rate for scheme liabilities |
5.46 |
6.90 |
The scheme actuary estimates that a 0.1% change in the discount rate would change the value of scheme liabilities by approximately 1.7%.
Mortality rate
Assumptions regarding future mortality experience are set based on advice, published statistics and experience. The average life expectancy in years of a pensioner retiring at age 65 on the balance sheet date is as follows:
|
|
2009 |
2008 |
|
Male |
21.0 |
21.0 |
|
Female |
24.0 |
24.0 |
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the balance sheet date is as follows:
|
|
2009 |
2008 |
|
Male |
23.0 |
23.0 |
|
Female |
25.0 |
25.0 |
The assets in the scheme and the expected rate of return were:
|
Long-term rate of return expected at |
Value at |
Long-term rate of return expected at |
Value at |
|
|
30 Sept |
30 Sept |
30 Sept |
30 Sept |
|
|
2009 |
2009 |
2008 |
2008 |
|
|
|
% p.a. |
£'000 |
% p.a. |
£'000 |
|
Equities |
8.4 |
101,032 |
8.4 |
105,548 |
|
Property |
7.5 |
945 |
7.9 |
1,379 |
|
Liability driven investments |
4.3 |
147,693 |
5.1 |
152,981 |
|
Other |
4.3 |
3,738 |
6.2 |
1,112 |
|
Average expected long term rate of return/Total fair value of assets |
5.95* |
253,408 |
6.45* |
261,020 |
*The overall expected rate of return on scheme assets is a weighted average of the individual expected rates of return on each asset class.
The Liability Driven Investment (‘LDI’) comprises a series of LIBOR earning cash deposits which are combined with contracts to hedge interest rate and inflation rate risk over the expected life of the scheme’s liabilities.
|
Reconciliation of funded status to balance sheet |
Value at |
Value at |
|
30 September |
30 September |
|
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Fair value of plan assets |
253,408 |
261,020 |
|
Present value of funded defined benefit obligations |
(261,785) |
(217,621) |
|
(Liability)/asset recognised on the balance sheet |
(8,377) |
43,399 |
|
Amounts recognised in the income statement |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Current service cost |
279 |
647 |
|
Curtailments |
(300) |
- |
|
Interest cost |
14,592 |
13,610 |
|
Expected return on plan assets |
(15,020) |
(14,860) |
|
Total recognised in the income statement |
(449) |
(603) |
|
Changes to the present value of the defined benefit obligation during the year |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Opening defined benefit obligation |
217,621 |
235,390 |
|
Current service cost |
279 |
647 |
|
Interest cost |
14,592 |
13,610 |
|
Contributions by plan participants |
293 |
459 |
|
Actuarial losses/(gains) on plan liabilities* |
42,187 |
(21,631) |
|
Net benefits paid out |
(12,887) |
(10,854) |
|
Curtailments |
(300) |
- |
|
Closing defined benefit obligation |
261,785 |
217,621 |
*Includes changes to the actuarial assumptions
|
Changes to the fair value of the scheme assets during the year |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Opening fair value of plan assets |
261,020 |
251,770 |
|
Expected return on plan assets |
15,020 |
14,860 |
|
Actuarial (losses)/gains on plan assets |
(10,864) |
3,949 |
|
Contributions by the employer |
826 |
836 |
|
Contributions by the plan participants |
293 |
459 |
|
Net benefits paid out |
(12,887) |
(10,854) |
|
Closing fair value of plan assets |
253,408 |
261,020 |
|
Actual return on plan assets |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Expected return on plan assets |
15,020 |
14,860 |
|
Actuarial (losses)/gains on plan assets |
(10,864) |
3,949 |
|
Actual return on plan assets |
4,156 |
18,809 |
|
Amounts recognised in the statement of recognised income and expense (SoRIE) |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Total actuarial (losses)/gains in SoRIE |
(53,051) |
25,580 |
|
Cumulative amount of gains recognised in SoRIE |
1,487 |
54,538 |
|
History of asset values, defined benefit obligation, (deficit)/surplus in scheme and experience gains and (losses) |
|||||
|
2009 |
2008 |
2007 |
2006 |
2005 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Fair value of plan assets |
253,408 |
261,020 |
251,770 |
249,689 |
235,686 |
|
Defined benefit obligation |
(261,785) |
(217,621) |
(235,390) |
(261,936) |
(250,855) |
|
(Deficit)/surplus in plan |
(8,377) |
43,399 |
16,380 |
(12,247) |
(15,169) |
|
2009 |
2008 |
2007 |
2006 |
2005 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Experience (losses)/gains on plan assets |
(10,864) |
3,949 |
(3,583) |
6,487 |
26,384 |
|
Experience (losses)/gains on plan liabilities |
(1,917) |
(213) |
(232) |
12,072 |
(768) |
In addition, commencing 1 February 2003, a defined contribution scheme was introduced for new employees within the UK. The cost to the Group in respect of this scheme for the year ended 30 September 2009 was £102,000 (2008: £92,000).
USA post retirement benefits
The liabilities of the unfunded benefit scheme were valued by an independent actuary at 30 September 2008 and updated at 30 September 2009, based on the following principal assumptions.
|
|
2009 |
2008 |
|
Discount rate |
7.5% |
7.5% |
|
Healthcare cost trend rate |
5.5% |
9% reducing |
|
|
|
to 5.5% by 2009 |
|
Amounts charged/(credited) to operating profit in respect of post retirement benefits |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Current service cost |
55 |
42 |
|
Past service credit |
(40) |
(1,144) |
|
Total operating charge/(credit) |
15 |
(1,102) |
|
Movement in provision during the year |
||
|
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
Provision at the beginning of the year |
(852) |
(1,730) |
|
Movement: |
|
|
|
Current service cost |
(55) |
(42) |
|
Contributions |
164 |
132 |
|
Past service credit |
40 |
1,144 |
|
Other finance costs |
(34) |
(67) |
|
Actuarial loss |
- |
(153) |
|
Exchange difference |
(135) |
(136) |
|
Provision at the end of the year |
(872) |
(852) |
|
Related deferred tax asset |
305 |
298 |
|
Net post retirement liability |
(567) |
(554) |