Siemens 2005 Annual Report Download - page 182
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182
Pension benefits: Assumptions for the calculation of the PBO and NPPC
Assumed discount rates, compensation increase rates and pension progression rates used in
calculating the PBO together with long-term rates of return on plan assets vary according to the
economic conditions of the country in which the retirement plans are situated or where plan
assets are invested as well as capital market expectations.
The weighted-average assumptions used for the actuarial valuation of the PBO as of the
respective measurement date (June 30 or September 30), were as follows:
The assumptions used for the calculation of the PBO as of the measurement date (June 30 or
September 30), of the preceding fiscal year are used to determine the calculation of interest cost
and service cost of the following year. Therefore, the assumptions used for the calculation of the
NPPC for fiscal 2006 are already determined. Regarding the assumption of the expected rate of
return on plan assets, the Company decided to maintain the same fiscal 2005 return for fiscal
2006 for the majority of its principal pension plans. Accordingly, the total expected return for fis-
cal 2006 will be based on such expected rate of return multiplied by the market-related value of
plan assets at the fiscal 2005 measurement date. The market related value and thus the expected
return on plan assets are adjusted for significant events after measurement date, such as a sup-
plemental funding. Due to the implementation of the BSAV in fiscal 2004, the effect of the com-
pensation increase on the domestic pension plans is substantially eliminated.
Management’s discussion and analysis
Year ended September 30, 2005 Year ended September 30, 2004
Total Domestic Foreign Total Domestic Foreign
Discount rate 4.5% 4.35% 4.9% 5.5% 5.25% 5.9%
Germany 4.35% 5.25%
U.S. 5.25% 6.5%
U.K. 4.9% 5.7%
Rate of compensation increase 2.6% 2.25% 3.2% 2.6% 2.25% 3.3%
Germany 2.25% 2.25%
U.S. 3.25% 3.25%
U.K. 3.7% 4.0%
Rate of pension progression 1.2% 1.0% 2.0% 1.3% 1.0% 2.3%
Germany 1.0% 1.0%
U.K. 2.7% 2.8%