John Lewis Partnership plc annual report and accounts 2012

Business review Review of performance (continued)

Net finance costs

 Net finance costs decreased by £23.6m (37.4%) to £39.5m. Changes to the financing element of pension costs, which is the difference between the expected return on scheme assets and the interest cost on the scheme liabilities, and the financing element of long service leave are driven by changes in the external investment market, including rates for corporate bonds, which means these costs can change materially from one year to the next, driven by market volatility. The financing elements of pensions and long service leave was a net credit of £23.8m, compared to a charge of £2.2m last year. Excluding pensions, long service leave and other non-cash fair value adjustments, net finance costs have reduced slightly, by £1.4m (2.3%), from £61.7m to £60.3m.

Pension charge

 We continue to maintain an open non-contributory final salary defined benefit pension scheme. We now have about 46,500 active members, 25,500 pensioners and dependants and 32,000 deferred pensioners in the Scheme.

Day-to-day management of the funds is delegated to a number of investment managers under the guidance of the Trustees. The assets of the schemes are held in separate funds administered by the Trustees. The Partnership takes a long term view of its pensions liabilities but recognises that there are significant risks from increasing longevity, the effect of age discrimination legislation, and from volatility and uncertainty in the investment markets.

The pension accounting charge included within operating profit of £124.0m for the year to 28 January 2012, was up 0.9% or £1.1m on last year. Actual pension cash contributions in respect of the year were £117.8m, compared to £267.0m for last year, or £117.0m excluding the £150.0m one-off special cash contribution made in March 2010.

A defined contribution scheme is also available in the three year period for Partners waiting to enter the defined benefit scheme, to provide pension benefits during the waiting period. The Partnership matches contributions made by Partners, up to 6% of pensionable pay. During the year 2,700 Partners contributed £1.8m to the defined contribution scheme and the Partnership provided contributions of £1.4m. Partners are also able to top up their pension provision with Additional Voluntary Contributions (AVCs). During the year 18,800

Graph showing Net Finanace costs (£m)

Graph showing Interest Cover (times)

Graph showing Pension charge (£m)

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