Notes to the Interim Report & Accounts
(unaudited)
9 Post-retirement benefits
Smiths operates a number of defined benefit plans throughout the world. The principal schemes are in the United Kingdom and in the United States and are of the defined benefit type, with assets held in separate trustee-administered funds. The principal changes to the assumptions used in updating the valuations for defined benefit pension plans are as follows:
|
|
2 February 2008 |
31 July 2007 |
||
|
|
UK |
US |
UK |
US |
|
Rate of increase in salaries |
4.3% |
3.8% |
4.1% |
3.8% |
|
Rate of increase in pensions in payment |
3.3% |
n/a |
3.1% |
n/a |
|
Rate of increase in deferred pensions |
3.3% |
n/a |
3.1% |
n/a |
|
Discount rate |
6.2% |
6.3% |
5.8% |
6.4% |
|
Inflation rate |
3.3% |
2.8% |
3.1% |
2.8% |
An operating charge of £10.7m and an interest credit of £22.6m have been recognised in the six months to 2 February 2008 in respect of defined benefit pension and post-retirement healthcare plans. The operating charge includes a curtailment gain of £1.1m relating to the disposal of Marine Systems and is reported as a profit on business disposal. The interest credit includes £2.0m relating to the disposal of the Aerospace operations and is reported within discontinued operations.
Special contributions of £4.1m in relation to the sale of Aerospace have been made in the period.
Changes in the market value of post-retirement benefit scheme assets were largely due to a decline in global stock market values.
The amounts recognised in the balance sheet were as follows:
|
|
2 February |
3 February |
31July |
|
Market value of funded plan assets |
3,245.7 |
3,221.4 |
3,318.9 |
|
Present value of funded scheme liabilities |
(3,000.9) |
(3,033.9) |
(3,019.2) |
|
Unfunded pension plans |
(55.8) |
(43.7) |
(51.5) |
|
Post-retirement healthcare |
(64.9) |
(60.8) |
(62.2) |
|
Unrecognised asset due to surplus restriction |
(2.4) |
(76.9) |
(2.4) |
|
Net retirement benefit asset |
121.7 |
6.1 |
183.6 |
|
Retirement benefit assets |
306.6 |
179.2 |
333.7 |
|
Retirement benefit liabilities |
(184.9) |
(173.1) |
(150.1) |
|
Net retirement benefit asset |
121.7 |
6.1 |
183.6 |
The unrecognised asset due to surplus restriction shown at 3 February 2007 was based on an estimate of the impact of the Aerospace disposal on the Smiths pension plans. At 31 July 2007 the unrecognised asset was reduced to £2.4m following a detailed actuarial review.