RBS 2003 Annual Report Download - page 149

147
Annual Report and Accounts 2003
Notes on the accounts
The latest formal valuation of The Royal Bank of Scotland Staff Pension Scheme and the National Westminster Bank Pension
Fund was carried out as at 31 March 2001 on a basis that assumed the merger of the schemes. The results of this valuation
and the principal actuarial assumptions were:
Market value of scheme assets (£m) 13,027
Funding level 108%
Excess of scheme assets over schemes liabilities (£m) 1,058
Valuation rate of interest:
past service liabilities (per annum) – pensioners 5.5%
past service liabilities (per annum) – non-pensioners 6.0%
future service liabilities (per annum) 6.75%
Salary growth (per annum) (1) 4.25%
Pension increases (per annum) 2.5%
Price inflation (per annum) 2.5%
Notes:
(1) In addition, allowance is made for promotional salary increases.
(2) Assumptions for rate of dividend increases are not relevant to the bases of valuations adopted.
The pension costs relating to the merged schemes were:
2003 2002
Pension costs for the year £m £m
Regular cost 274 263
Amortisation of pension fund surplus (151) (153)
Prior year service costs — —
Amortisation of surplus recognised on acquisition of NatWest 77 77
Net pension cost 200 187
FRS 17
In accordance with the transitional requirements of FRS 17 interim valuations of the Group’s schemes were prepared to
31 December 2003 and 31 December 2002 by independent actuaries, using the following assumptions:
2003 2002 2001
Main UK Other Group Main UK Other Group Main UK Other Group
scheme schemes* scheme schemes* scheme schemes*
Rate of increase in salaries (per annum) 3.95% 3.8% 3.50% 3.2% 4.25% 3.2%
Rate of increase in pensions in payment (per annum) 2.70% 2.3% 2.25% 1.7% 2.50% 2.3%
Discount rate (per annum) 5.60% 5.8% 5.75% 5.8% 6.00% 6.1%
Inflation assumption (per annum) 2.70% 2.1% 2.25% 1.7% 2.50% 2.2%
* weighted average
In addition to the main scheme, the Group operates a number
of other UK and overseas pension schemes and also provides
other post-retirement benefits, principally through subscriptions
to private healthcare schemes in the UK and the US and
unfunded post-retirement benefit plans. Provision for the costs
of these benefits is charged to the profit and loss account over
the average remaining future service lives of the eligible
employees. The amounts are not material.
In accordance with SSAP 24, the pension costs relating to the
main scheme are based on the actuarial valuation as at 31
March 2001. Since that date, stock market equity values and
bond yields have declined. The next triennial actuarial valuation
will be carried out as at 31 March 2004.