Tesco 2014 Annual Report Download - page 116

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Defined benefit plans
United Kingdom
The principal plan within the Group is the Tesco PLC Pension Scheme (the ‘Scheme’), which is a funded defined benefit pension scheme in the UK, the assets
of which are held as a segregated fund and administered by the Trustee.
The Scheme is established under trust law and has a corporate trustee that is required to run the Scheme in accordance with the Scheme’s Trust Deed and
Rules and to comply with the Pension Scheme Act 1993, Pensions Act 1995, Pensions Act 2004 and all the relevant legislation. Responsibility for governance
of the Scheme lies with the Trustee. The Trustee is a company whose directors comprise of:
i) representatives of the Group; and
ii) the Scheme participants,
in accordance with its articles of association and UK pension law.
All members are eligible to join the Career Average section of the Scheme (‘Pension Builder’), where benefits are based on a member’s salary and their length
of service. There is a Final Salary section of the Scheme which was closed to new entrants in 2001.
Towers Watson Limited, an independent actuary, carried out the latest triennial actuarial assessment of the scheme as at 31 March 2011, using the projected
unit method.
At 31 March 2011, the actuarial deficit was £934m. The market value of the schemes’ assets was £5,587m and these assets represented 86% of the benefits
that had accrued to members, after allowing for expected increases in earnings and pensions in payment.
The scheme has a duration of 22 years.
Scheme Liabilities as at 31 March 2011
The table below shows a breakdown of the liabilities held by the Scheme as at 31 March 2011, the date of the last triennial valuation.
%
Active 55
Deferred 19
Pensioner 26
The table below shows a breakdown of the liabilities for active members held by the Scheme as at 31 March 2011
%
Pension Builder 49
Final Salary 51
Overseas
The most significant overseas schemes are the funded defined benefit schemes which operate in the Republic of Ireland, Thailand and South Korea.
An independent actuary, using the projected unit method, carried out the latest actuarial assessment of the Republic of Ireland scheme as at 1 April 2010,
Thailand as at 23 February 2013 and South Korea as at 22 February 2014.
The valuations used for IAS 19 have been based on the most recent actuarial valuations and updated by Towers Watson Limited to take account of the
requirements of IAS 19 in order to assess the liabilities of the schemes as at 22 February 2014. The schemes’ assets are stated at their market values as at
22 February 2014. Towers Watson Limited have updated the most recent Republic of Ireland, Thailand and South Korea valuations. The liabilities relating
to retirement healthcare benefits have also been determined in accordance with IAS 19.
Principal assumptions
The major assumptions, on a weighted average basis, used by the actuaries were as follows: 2014
%
2013
%
Discount rate 4.7 5.1
Price inflation 3.3 3.3
Rate of increase in deferred pensions*2.3 2.3
Rate of increase in salaries 3.4 3.4
Rate of increase in pensions in payment*
Benefits accrued before 1 June 2012 3.1 3.1
Benefits accrued after 1 June 2012 2.3 2.3
Rate of increase in career average benefits
Benefits accrued before 1 June 2012 3.3 3.3
Benefits accrued after 1 June 2012 2.3 2.3
* In excess of any Guaranteed Minimum Pension (‘GMP’) element.
UK mortality assumptions
The Group conducts analysis of mortality trends under the Tesco PLC Pension Scheme in the UK as part of the triennial actuarial valuation of the Scheme.
At the latest triennial actuarial valuation as at 31 March 2011 the following assumptions were adopted for funding purposes:
Base tables:
90% of the SAPS normal male pensioners for male staff and 80% of the SAPS all male pensioners light for male senior managers.
105% of the SAPS normal female pensioners for female staff and 90% for female senior managers.
These assumptions were used for the calculation of the pension liability as at 22 February 2014 for the main UK scheme.
Note 26 Post-employment benefits continued
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 113