The group operates a funded defined benefit pension scheme for full-time employees, the assets of which are held as a segregated fund, administered by trustees.
The pension cost relating to the scheme is assessed in accordance with the advice of an independent qualified actuary using the projected unit method. The latest actuarial assessment of this scheme was at 5 April 1996. The assumptions which have the most significant effects on the results of the valuation are those relating to the rate of return on investments and the rate of increase in salaries and pensions. It was assumed that the investment return would be 8 1/2% per annum with dividend growth of 4% per annum, that salary increases would average 5 1/2% per annum and that pensions would increase at the rate of 3 1/2% per annum.
At the date of the latest actuarial valuation, the market value of the scheme's assets was £792m and the actuarial value of these assets represented 108% of the benefits that had accrued to members, after allowing for expected future increases in earnings.
Benefit improvements to members have been agreed with the trustees which have resulted in an increased company cost. This increasing ongoing cost has been offset by the amortisation of the surplus as a level percentage of pay over nine years.
The pension cost of this scheme to the group was £39m (1996 £34m).
The group also operates a defined contribution pension scheme for part-time employees which was introduced on 6 April 1988. The assets of the scheme are held separately from those of the group, being invested with an insurance company. The pension cost represents contributions payable by the group to the insurance company and amounted to £13m (1996 £10m). There were no material amounts outstanding to the insurance company at the year end.
The group also operates defined contribution schemes in France. The contributions payable under these schemes of £3m (1996 £2m) have been fully expensed against profits in the current year.
