John Lewis Partnership plc annual report and accounts 2012

Partners contributed £21.0m in AVCs. At the year end the combined defined contribution and AVC funds stood at £236.3m.

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. This assesses, on a prudent basis, the amount of assets to be set aside to meet the pension promises made to the valuation date, taking into account future expected investment returns, and determines the future level of funding, estimated on prudent assumptions, that the Partnership needs to put into the schemes. For the main pension scheme, the last formal valuation was carried out as at 31 March 2010. This resulted in a funding surplus of £83m. The market value of the assets of the fund as at 31 March 2010 was £2,341m. The actuarial valuation of these assets showed that they were sufficient to cover 104% of the benefits which had accrued to members. As at 28 January 2012 the main pension scheme is estimated to have a funding deficit of £5m, and therefore the assets are sufficient to cover 100% of the benefits which had accrued to members.

In addition to the main scheme there is also a senior pension top up scheme. The last formal valuation of this scheme was also carried out as at 31 March 2010 and resulted in a funding deficit of £6m. Deficit reduction contributions totalling £6m were made in January and February 2011 to eliminate this deficit. As at 28 January 2012, the senior pension top up scheme is estimated to have a funding deficit of £5m.

The next formal actuarial valuation of both pension schemes will take place as at 31 March 2013.

Accounting valuation under IAS 19

 IAS 19, the International Accounting Standard on employee benefits, requires the financial position of the Partnership’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, as members’ liabilities at the balance sheet date are valued using market rates of corporate bonds and do not reflect expected future returns on the assets the fund owns. Other key assumptions for the IAS 19 accounting valuation have been based on those used for the most recent actuarial valuation, adjusted to represent a best estimate rather than a prudent view, where appropriate. These have been updated to assess the assets and liabilities of the schemes as at 28 January 2012.

Graph showing Main Pension Fund Actuarial Valuation

Graph showing Pension Liabilities and Accounting Deficit

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