Annual Report and Accounts 2016


John Lewis Partnership plc


135


6 Pensions (continued) 6.1 Retirement benefit obligations (continued)


6.1.1 Financial assumptions This section details the assumptions used to calculate the total defined benefit pension obligation. This is the estimate of the current cost of meeting future benefits to be paid out by the pension scheme. The calculation includes applying a discount rate to estimate the present day fair value of the pension payments, allowing for future expected increases in earnings and pension payments and the expected life expectancy of the members of the pension scheme.


Scheme assets are stated at market values at 30 January 2016. The following financial assumptions have been used: 2016 Discount rate


Future Retail Price Inflation (RPI) Future Consumer Price Inflation (CPI) Increase in earnings


Increase in pensions – in payment Pre-April 2016 Post-April 2016


Increase in pensions – deferred


3.70% 3.00% 2.00% 3.54%


2.85% 1.60% 2.00%


2015


3.15% 2.80% 1.80% 3.30%


2.70% –


1.80%


Increases in earnings are projected to be at 3.90% until 2020 and then at a long-term rate of 1.0% above consumer price inflation (2015: 0.5% above retail price inflation). Increases in pensions in payment are projected to be 0.15% (2015: 0.1%) below retail price inflation for pensionable service built up before April 2016 and 0.40% below consumer price inflation for pensionable service built up after April 2016, reflecting the impact of a cap on the level of pension increases. Increases in deferred pensions are projected to be in line with consumer price inflation.


The post-retirement mortality assumptions used in valuing the pensions liabilities were based on the ‘S1 Light’ series standard tables. Based on scheme experience, the probability of death at each age was multiplied by 127% for males and 114% for females. Future improvements in life expectancy have been allowed for in line with the standard CMI model projections subject to a long-term trend of 1.25%.


6.1.2 Demographic assumptions The average life expectancies assumed were as follows:


2016 Average life expectancy for a 60 year old (in years) Average life expectancy at age 60, for a 40 year old (in years) 6.1.3 Amounts recognised in the financial statements


This section details the amounts recognised in our consolidated financial statements in relation to our pension scheme. This consists of the net pension liability, recognised on our balance sheet, the cost of providing the pension benefit over the year, recognised in the income statement, and actuarial gains and losses (being changes in assumptions, or assumptions not being borne out in practice) which are recognised in the statement of comprehensive income/expense. The movements are broken down into the key components that impact on the pension scheme.


Amounts recognised in the balance sheet


Defined benefit obligation for funded arrangements Defined benefit obligation for unfunded arrangements Total defined benefit obligation Total value of assets


Defined benefit liability at year-end


2016 £m


(5,120.0) (20.0)


(5,140.0) 4,198.4 (941.6)


2015 £m


(5,280.0) (21.0)


(5,301.0) 4,051.7


(1,249.3)


Men Women 27.0 28.9


29.1 31.1


2015


Men Women 26.9 28.8


29.0 31.0


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