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During the year Partners contributed £1.3m and the Partnership provided contributions of £0.9m. Partners are also able to top up their pension provision with Additional Voluntary Contributions (AVCs). During the year 17,900 Partners contributed £20.7m in AVCs. At the year end the combined defined contribution and AVC fund stood at £183.4m.

Actuarial valuation of the pension funds

A formal actuarial valuation is carried out at least once every three years by an independent professionally qualified actuary, in order to assess the amount of assets to be set aside to meet the pension promises, and to determine the future level of funding that the Partnership should put into the schemes. For the primary pension scheme, the last formal valuation was carried out as at 31 March 2007. The market value of the assets of the fund as at 31 March 2007 was £1,843m. The actuarial valuation of these assets showed that they were sufficient to cover 97% of the benefits which had accrued to members. There is also a senior scheme. The last valuation of this scheme was carried out as at 31 March 2007. The market value of the assets of the scheme as at 31 March 2007 was £22.0m. The actuarial valuation of these assets showed that they were sufficient to cover 73% of the benefits which had accrued to members.

Since March 2007, scheme assets have produced a lower than expected return, falling short by approximately £400m to £450m due to the unexpected fall in investment returns during 2008 of 20% as a result of adverse market conditions and the economic downturn. At the same time, inflation expectations worsened from 3.0% to approximately 3.8%, resulting in an increase in liabilities of approximately £200m to £250m. Taken together, these movements have increased the pension fund deficit by an estimate in the order of £650m to £700m.

The next formal actuarial valuation of both pension schemes will take place as at 31 March 2010 and will publish its results a year later.

Accounting valuation under IAS 19

IAS 19 requires the financial position of the group’s pension funds to be reassessed at each balance sheet reporting date following a prescribed methodology. This produces results that are different from, and more volatile than, the actuarial valuation, the purpose of which is to assess the funding requirements of the pension schemes. Pension commitments have been calculated based on the assumptions used for the most recent actuarial valuation, which have been updated by the actuaries to assess the assets and liabilities of the schemes as at 30 January 2010. The assets of the pension schemes as at 30 January 2010 were £1,948m (2009: £1,622m). (Continued on page 12...)


(Graph of Fund assets IAS 19 basis 2009 2010)

(Graph of pension liabilities and fund deficit 2009 2010)