FSA Annual Report 2006/07 - Better Regulation Ltd
FSA Annual Report 2006/07 - Better Regulation Ltd FSA Annual Report 2006/07 - Better Regulation Ltd
Section five – Financial statements FSA Annual Report 2006/07 87 Final Salary section The most recent actuarial valuation of the FSA Pension Plan was carried out as at 1 April 2004 by an independent actuary, using the projected unit method. The results of this valuation have been updated for the purpose of IAS 19 as at March 2007, in order to allow for any changes in assumptions and movements in liabilities over the period. The next full actuarial valuation is expected to be carried out as at 1 April 2007, and should be available during 2007/08. The major assumptions used for the purpose of actuarial assumptions were as follows: At At 31 March 31 March 2007 2006 Expected rate of salary increases 4.0% 4.0% Corporate bond discount rate 5.2% 4.9% Expected return on scheme assets 7.3% 6.9% Retail price inflation (RPI) 3.0% 2.8% Future pension increases 2.9% 2.8% In assessing the value of funded obligations, the mortality assumptions for the Pension Plan are based on current mortality tables and allows for future improvements in life expectancy. The 2007 mortality assumptions are based on an actuarial table ‘PA1992, projected to allow for future improvements using medium cohort projections and by an individual’s year of birth’. The 2006 mortality assumptions were based on an actuarial table PA92c2010 for current pensioners and PA92c2030 for future pensioners. The table below illustrates the assumed life expectancies at retirement of staff when they retire (staff are assumed to retire at the age of 60). 2007 2006 years years Retiring today Males 26.7 23.5 Females 29.7 26.5 Retiring in 15 years Males 27.7 25.2 Females 30.5 28.2 The amount recognised in the balance sheet is as follows: 2007 2006 £m £m Fair value of plan assets 289.1 250.6 Less: Present value of funded obligations (367.1) (340.1) Deficit in the scheme (78.0) (89.5) Unfunded pension liabilities (1.9) (1.8) Net liability recognised in the balance sheet (79.9) (91.3)
88 Section five – Financial statements FSA Annual Report 2006/07 A small number of current and former employees have benefit promises that cannot be delivered entirely through the tax-approved scheme described above. At 31 March 2007 the liability is £1.9m (2006: £1.8m) to cover the cost of these promises. An amount of £0.1m (2006: £0.4m) is included in the total pension cost for the year in note 6, representing the value of the additional benefits accrued. Amounts recognised in the income statement in respect of the defined benefit plan are as follows: 2007 2006 £m £m Current service cost 9.4 8.2 Past service cost 0.3 0.3 Administration expenses 9.7 8.5 Expected return on plan assets 18.0 13.7 Interest on scheme liabilities (17.0) (14.5) Other finance income / (costs) 1.0 (0.8) Current service costs and past service costs are disclosed as administration expenses, expected return on plan assets and interest cost are disclosed as interest income in the income statement and actuarial gains and losses of £14.2m (2006: £20.1m) are recognised in the period in which they occur as part of the Statement of recognised income and expense. The actual return on plan assets was £9.3m (2006: £52.5m). Changes in the present value of the defined benefit obligation are as follows: 2007 2006 £m £m Opening obligation (340.1) (261.1) Current service cost (9.4) (8.2) Past service cost (0.3) (0.3) Benefits paid 5.2 2.9 Interest cost (17.0) (14.5) Actuarial losses (5.5) (58.9) Closing obligation (367.1) (340.1)
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Section five – Financial statements<br />
<strong>FSA</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2006</strong>/<strong>07</strong><br />
87<br />
Final Salary section<br />
The most recent actuarial valuation of the <strong>FSA</strong> Pension Plan was carried out<br />
as at 1 April 2004 by an independent actuary, using the projected unit<br />
method. The results of this valuation have been updated for the purpose of<br />
IAS 19 as at March 20<strong>07</strong>, in order to allow for any changes in assumptions<br />
and movements in liabilities over the period. The next full actuarial valuation<br />
is expected to be carried out as at 1 April 20<strong>07</strong>, and should be available<br />
during 20<strong>07</strong>/08.<br />
The major assumptions used for the purpose of actuarial assumptions were<br />
as follows:<br />
At At<br />
31 March 31 March<br />
20<strong>07</strong> <strong>2006</strong><br />
Expected rate of salary increases 4.0% 4.0%<br />
Corporate bond discount rate 5.2% 4.9%<br />
Expected return on scheme assets 7.3% 6.9%<br />
Retail price inflation (RPI) 3.0% 2.8%<br />
Future pension increases 2.9% 2.8%<br />
In assessing the value of funded obligations, the mortality assumptions for<br />
the Pension Plan are based on current mortality tables and allows for future<br />
improvements in life expectancy. The 20<strong>07</strong> mortality assumptions are based<br />
on an actuarial table ‘PA1992, projected to allow for future improvements<br />
using medium cohort projections and by an individual’s year of birth’. The<br />
<strong>2006</strong> mortality assumptions were based on an actuarial table PA92c2010 for<br />
current pensioners and PA92c2030 for future pensioners.<br />
The table below illustrates the assumed life expectancies at retirement of staff<br />
when they retire (staff are assumed to retire at the age of 60).<br />
20<strong>07</strong> <strong>2006</strong><br />
years years<br />
Retiring today<br />
Males 26.7 23.5<br />
Females 29.7 26.5<br />
Retiring in 15 years<br />
Males 27.7 25.2<br />
Females 30.5 28.2<br />
The amount recognised in the balance sheet is as follows:<br />
20<strong>07</strong> <strong>2006</strong><br />
£m £m<br />
Fair value of plan assets 289.1 250.6<br />
Less: Present value of funded obligations (367.1) (340.1)<br />
Deficit in the scheme (78.0) (89.5)<br />
Unfunded pension liabilities (1.9) (1.8)<br />
Net liability recognised in the balance sheet (79.9) (91.3)
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