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25 Retirement benefit obligations (continued)

The actuaries have recommended a normal future annual contribution rate of 12.8% of gross taxable pay of members, together with an additional £8.1m per year in respect of the past-service deficit arising from the actuarial valuation. The next triennial actuarial valuation of the fund will take place as at 31 March 2010.

As explained in note 8, there is also a senior pension scheme which provides additional benefits to certain members of senior management. The actuaries have recommended a contribution of £1.4m for the year to 29 January 2011.

The contributions expected to be paid to the pension schemes during the year to 29 January 2011 amount to £101m.

Pension commitments have been calculated based on the most recent actuarial valuations, as at 31 March 2007, which have been updated by the actuaries to assess the assets and liabilities of the schemes as at 30 January 2010.

Scheme assets are stated at market values at 30 January 2010. The following financial assumptions have been used:

2010 2009

Future price inflation 3.25% 3.50%
Discount rate 5.70% 6.90%
Expected return on assets 7.80% 8.20%
Increases in earnings 3.75% 4.50%
Increases in pensions 3.25% 3.50%

The expected return on assets is a weighted average of the individual asset categories and their expected rates of return, which are determined by consideration of historical experience and current market factors. Increases in earnings are projected at 0.5% above inflation, with increases in pensions being in line with inflation.

The financial assumption which has the most significant effect on the valuation of scheme liabilities and the current service cost is the real discount rate, i.e. the discount rate less the rate of future price inflation. A movement in the real discount rate of 0.10% would have the effect of increasing or decreasing the IAS 19 defined benefit obligation by circa £50m, and would increase or decrease the current service cost by circa £2.5m.

The post-retirement mortality assumptions used in valuing the pensions liabilities were based on the “00” series standard tables for all retirements, together with medium cohort improvement factors with a year of use of 2007, adjusted by half a year to reflect the outcome of a mortality study. It is assumed that younger members will live longer in retirement than older members. This reflects the expectation that mortality rates will continue to fall over time.

The average life expectancies assumed were as follows:

2010 2009
Men Women Men Women

Average life expectancy (in years) for a 60-year-old 26.0 28.4 26.0 28.4

Average life expectancy (in years) at age 60,
for a 40-year-old 27.3 29.5 27.3 29.5