RBS 2004 Annual Report Download - page 194
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192
Notes on the accounts
Notes on the accounts continued
53 Significant differences between UK and US generally accepted accounting principles (continued)
Pensions (continued)
2004 2003 2002
Prepaid pension cost: £m £m £m
Funded status (2,594) (2,141) (1,844)
Unrecognised net actuarial loss 5,990 5,078 5,266
Unrecognised prior service cost 12 13 14
Unrecognised transition amount (6) (14) (22)
Prepaid pension cost at year end 3,402 2,936 3,414
2004 2003 2002
Components of net periodic pension cost: £m £m £m
Service cost 420 340 303
Interest cost 768 706 715
Expected return on plan assets (840) (757) (901)
Amortisation of prior service cost 1 11
Amortisation of loss 263 287 138
Amortisation of net transition asset (8) (8) (8)
Net periodic pension cost 604 569 248
Assumptions
2004 2003 2002
Weighted average assumptions used at 31 December: % per annum % per annum % per annum
Discount rate for liabilities 5.40 5.60 5.75
Salary increases 3.95 3.95 3.50
Pension increases 2.70 2.70 2.25
Long-term rate of return on assets 6.95 7.20 7.20
2004 2003 2002
Weighted-average allocations of market value of plan assets at 31 December: %%%
Equity shares 57 65 67
Debt securities 31 32 31
Other 12 32
Total 100 100 100
At 31 December 2004, the fund's accumulated benefit
obligation was underfunded by £561 million (2002 – £168
million). This resulted in a reduction in the accumulated other
comprehensive income component of US GAAP shareholders'
equity of £3,951 million (2002 – £3,568 million), comprising the
excess of the accumulated benefit obligation over the market
value of assets of £561 million (2002 – £168 million), prepaid
pension cost of £3,402 million (2002 – £3,414 million) less
unrecognised prior service cost of £12 million (2002 – £14
million). This was reduced by deferred tax of £1,185 million
(2002 – £1,070 million). At 31 December 2003, the fund had a
surplus of assets over its accumulated benefit obligation and
no minimum liability was recognised.
Cash flows
The following pension payments under the main scheme,
which reflect expected future service, as appropriate, are
expected to be paid:
£m
2005 511
2006 521
2007 530
2008 543
2009 557
After 2010 3,072
The Group expects to contribute £376 million to its main UK
pension plan in 2005.