RBS 2007 Annual Report Download - page 143

141
RBS Group • Annual Report and Accounts 2007
Financial statements
Main scheme All schemes
Principal actuarial assumptions at 31 December 2007 2006 2005 2007 2006 2005
weighted average
Discount rate 6.0% 5.3% 4.8% 5.8% 5.3% 4.8%
Expected return on plan assets (weighted average) 6.9% 6.9% 6.5% 6.8% 6.9% 6.5%
Rate of increase in salaries 4.5% 4.2% 4.0% 4.0% 4.1% 3.9%
Rate of increase in pensions in payment 3.2% 2.9% 2.7% 2.8% 2.8% 2.6%
Inflation assumption 3.2% 2.9% 2.7% 2.9% 2.9% 2.7%
Main scheme All schemes
Major classes of plan assets as a percentage of total plan assets 2007 2006 2005 2007 2006 2005
Equities 61.0% 60.5% 61.3% 57.8% 60.7% 61.6%
Index-linked bonds 18.2% 17.3% 18.1% 13.1% 16.1% 16.8%
Government fixed interest bonds 1.2% 2.5% 1.8% 12.9% 3.3% 2.6%
Corporate and other bonds 15.1% 14.0% 14.6% 12.0% 13.9% 14.6%
Property 3.8% 4.3% 3.6% 3.0% 4.5% 3.7%
Cash and other assets 0.7% 1.4% 0.6% 1.2% 1.5% 0.7%
Ordinary shares of the company with a fair value of £69 million (2006 – £89 million; 2005 – £78 million) are held by the Group’s pension
schemes; £65 million (2006 – £87 million; 2005 – £76 million) in the Main scheme which also holds other financial instruments issued by
the Group with a value of £606 million (2006 – £258 million; 2005 – £299 million).
The expected return on plan assets at 31 December is based upon the weighted average of the following assumed returns on the
major classes of plan assets:
Main scheme All schemes
2007 2006 2005 2007 2006 2005
Equities 8.1% 8.1% 7.7% 8.1% 8.1% 7.7%
Index-linked bonds 4.5% 4.5% 4.1% 4.5% 4.5% 4.1%
Government fixed interest bonds 4.5% 4.5% 4.1% 4.7% 4.5% 4.1%
Corporate and other bonds 5.5% 5.3% 4.8% 5.5% 5.3% 4.8%
Property 6.3% 6.3% 5.9% 6.3% 6.3% 5.9%
Cash and other assets 4.6% 4.6% 4.2% 4.5% 4.4% 3.7%
Post-retirement mortality assumptions (Main scheme) 2007 2006 2005
Longevity at age 60 for current pensioners (years)
Males 26.0 26.0 25.4
Females 26.8 28.9 28.2
Longevity at age 60 for future pensioners (years)
Males 28.1 26.8 26.2
Females 28.2 29.7 29.0
These post-retirement mortality assumptions are derived from standard mortality tables used by the scheme actuary to value the
liabilities for the main scheme. Following a comprehensive review of the mortality experience of the main scheme over the last three
years by the scheme actuary, different standard mortality tables (adjusted as appropriate) have been used in valuing the scheme
liabilities as at 31 December 2007.
Members of the Group sponsor a number of pension schemes
in the UK and overseas, predominantly defined benefit
schemes, whose assets are independent of the Group’s
finances. The Group’s defined benefit schemes generally
provide a pension of one-sixtieth of final pensionable salary for
each year of service prior to retirement up to a maximum of 40
years. Employees do not make contributions for basic pensions
but may make voluntary contributions to secure additional
benefits on a money-purchase basis. Since October 2006 The
Royal Bank of Scotland Group Pension Fund (‘Main scheme’)
has been closed to new entrants.
The Group also provides post-retirement benefits other than
pensions, 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 income statement over the average
remaining future service lives of eligible employees. The
amounts are not material.
Interim valuations of the Group’s schemes were prepared to
31 December by independent actuaries, using the following
assumptions:
3 Pension costs