John Lewis Partnership plc annual report and accounts 2013

23 Derivative financial instruments (continued)

The fair value of the derivative financial instruments held by the Partnership are classified as level 2 under the IFRS 7 fair value hierarchy as all significant inputs to the valuation model used are based on observable market data.

The fair values of the Partnership’s listed bonds and preference stock, which have been determined by reference to market price quotations, are shown below. For cash and other financial liabilities, book values approximate to fair value.

2013 £m - 2012 £m

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Bonds 826.8 914.3

Preference stock 3.3 3.7

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24 Retirement benefit obligations

The principal pension scheme operated by the Partnership is a defined benefit scheme, providing benefits based on final pensionable pay. The assets of this scheme are held in a separate, trustee administered fund.

The fund was last valued by an independent professionally qualified actuary as at 31 March 2010 using the projected unit method, which 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.

The actuaries recommended a normal future annual contribution rate of 12.2% of gross taxable pay of members. The next triennial actuarial valuation of the fund will take place as at 31 March 2013.

The senior pension scheme provided additional benefits to certain members of senior management. The senior pension scheme intended to produce a total pension worth two-thirds of pensionable pay at retirement at aged 60, after at least 20 or at least 30 years service, depending on the level of the benefit. The actuaries recommended an annual contribution rate of £1.5m. The senior pension scheme was merged into the main scheme on 31 March 2013.

In January 2013, the Partnership made a one-off contribution of £125m into the pension scheme. The ongoing contributions expected to be paid to the pension schemes during the year to 25 January 2014 amount to £115m.

Pension commitments have been calculated based on the most recent actuarial valuations, as at 31 March 2010, which have been updated by the actuaries to reflect the assets and liabilities of the schemes as at 26 January 2013.

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