16 Pension Schemes (continued) The differential between the assumed rate of inflation and the discount rate for liabilities is 1.6% (2014: 1.8%).
Salary inflation assumptions are as determined by the Board with regard to price inflation. The salary inflation from 31 May 2010 when the scheme closed to future accrual was assumed to be in line with inflation.
The financial assumptions are based on market conditions as at the review date of 27 June 2015 with discount rates based on the yields on long-dated high quality corporate bonds. The discount rate is lower than the discount rate used last year reflecting the change in bond yields over this period. The rate of return for plan assets is the long-term rate that reflects the yield on high quality corporate bonds as required under changes to IAS 19. The rate of return is effectively based on the discount rate with no allowance made for any outperformance expected from the scheme’s actual asset holding. The actual return on the scheme’s assets, net of expenses, over the year to the review date was around 7.7%.
2015 Pre-retirement mortality assumption Post-retirement mortality assumption
S1NA year of birth tables with CMI 2012 projections and 1.25% pa long-term rate of improvement
S1NA year of birth tables with CMI 2012 projections and 1.25% pa long-term rate of improvement
Under the mortality tables adopted, the assumed future life expectancy at age 65 is as follows: 2015
Male currently at age 45 Female currently at age 45 Male currently at age 65 Female currently at age 65
24.3 27.0 22.5 25.0
2014
24.2 26.9 22.5 25.0
Changing the year end 2015 assumptions to those of 2014 year end listed above, the deficit would have been £3,028,000 compared to the reported deficit of £3,837,000.
Sensitivity Analysis The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises changes in these assumptions and their approximate (decrease)/increase in liabilities.
2015
Discount rate plus 0.5% Discount rate minus 0.5% Inflation plus 0.5% Inflation minus 0.5%
Life expectancy plus 1.0 years Life expectancy minus 1.0 years
(£2.2 million) £2.5 million £2.2 million (£2.2 million) £0.4 million (£0.4 million)
The above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the same. The weighted average duration of the defined benefit obligation is around 19 years.
Risk Mitigation Strategies Whilst the Scheme does not explicitly hold risk mitigation strategies such as swaps, annuities or liability driven investments, the investment strategy is dominated by diversified growth funds which are intended to reduce the investment risk through diversification.
2014
S1NA year of birth tables with CMI 2012 projections and 1.25% pa long-term rate of improvement
S1NA year of birth tables with CMI 2012 projections and 1.25% pa long-term rate of improvement
62
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92
