Annual Report and Accounts 2016


John Lewis Partnership plc


137


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


6.1.4 Retirement benefit obligations The net defined benefit pension liability is the difference between the total pension liability (being the expected cost of making future defined benefit pension payments) and scheme assets. The table below details movements in the net defined benefit pension liability since the 2014/15 year-end. Movements in scheme assets are explained further in 6.1.5.


Movements in the net defined benefit liability are as follows:


a Pension expense, which is the cost of providing defined benefit pension benefits over the year. This is equal to the pension operating expenses set out above in 6.1.3, but excluding contribution expense and administrative expenses met directly by the employer


a Contributions paid into the scheme will reduce the value of the net pension liability


a Gains or losses recognised in equity relate to returns on plan assets being different to the discount rate (explained further in 6.1.5) and remeasurements (explained further below)


Reconciliation of net defined benefit liability


Net defined benefit liability at beginning of year Pension expense Contributions


Total gains/(losses) recognised in equity Net defined benefit liability at end of year


2016 £m


(1,249.3) (269.4) 166.0 411.1


(941.6)


2015 £m


(1,003.4) (215.2) 492.8


(523.5) (1,249.3)


The total pension liability (or defined benefit obligation) represents the current cost of meeting the future benefits to be paid out by the scheme. The movements in the defined benefit obligation are broken down into key areas that impact the obligation as follows:


a Service cost is the cost to the Partnership of future benefits earned by members which are attributable to members’ service in the current or past periods. This is charged to the income statement


a Future pension obligations are stated at present value. A discount rate is used to calculate this current value of the future liability. The interest on pensions liabilities is the unwinding of this discount rate and is charged to the income statement within finance costs


a Remeasurements arise from the uncertainty in making assumptions about future events in calculating the liability. These may arise from changes in assumptions, for example movements in the discount rate, or experience adjustments which result from differences between the financial assumptions made and what actually occurred over the period. Remeasurements are recognised in equity and shown in the statement of comprehensive income/expense


a Any cash benefits paid out by the scheme will reduce the defined benefit obligation Reconciliation of defined benefit obligation


Defined benefit obligation at beginning of year Service cost


Interest on pension liabilities


Remeasurements – gain/(loss) from changes in financial assumptions – experience gains Benefits paid


Defined benefit obligation at end of year The weighted average duration of the scheme liabilities at the end of the period is 21 years.


2016 £m


(5,301.0) (228.3) (165.2)


432.0 3.4


119.1 (5,140.0)


The scheme liabilities are 50.5% in respect of active scheme participants, 16.2% in respect of deferred scheme participants and 33.3% in respect of retirees.


2015 £m


(4,218.2) (173.2) (183.1)


(844.2) 7.9


109.8 (5,301.0)


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