Defined contribution schemes
The Group operates two defined contribution retirement benefit schemes. The assets of the schemes are held separately from those of the Group in funds under the control of trustees.
The total cost charged to income of £1,357,000 (2013: £1,691,000) represents contributions payable to these schemes by the Group at rates specified in the rules of the plans. As at 31 March 2014, contributions of £183,000 (2013: £200,000) due in respect of the current reporting period had not been paid over to the schemes.
Defined benefit schemes
The Group has a defined benefit scheme which is now closed to new members and no defined benefit membership rights will accrue under the scheme.
The scheme exposes the Group to actuarial and other risks, the most significant of which are considered to be:
|Investment risk||The present values of the scheme liabilities are calculated using a discount rate determined by reference to corporate bond yields; if the return on scheme assets is below this rate, it will create a plan deficit. The Group holds a significant proportion of growth assets (bonds, gilts and equities) to leverage the return generated by the scheme.|
|Interest risk||A decrease in the corporate bond interest rate will increase the scheme liabilities, although this will be partially offset by an increase in the return on the scheme's assets.|
|Longevity risk||The present values of the scheme liabilities are calculated by reference to the best estimate of the mortality of scheme participants which reflect continuing improvements in life expectancy. An increase in the life expectancy of the scheme participants will increase the scheme's liabilities.|
|Salary risk||The present values of the defined benefit scheme liabilities are calculated by reference to the future salaries of scheme participants. As such, an increase in the salary of the scheme participants will increase the scheme's liabilities.|
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 5 April 2011 by Mr Christopher Hunter, Fellow of the Institute of Actuaries. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.
|Key assumptions used:|
|Expected rate of salary increases||—||—|
|Future pension increases||3.1||2.9|
When considering mortality assumptions a male life expectancy to 85 at age 65 has been used for the year ended 31 March 2014 (2013: 85).
Impact on scheme liabilities of changes to key assumptions:
|Assumption||Change in assumption||Impact on scheme liabilities|
|Discount rate||Increase/decrease by 0.25%||Decrease/increase by 4.3%|
|Rate of mortality||Increase by 1 year||Increase by 3.0%|
Amounts recognised in income in respect of these defined benefit schemes are as follows:
|Expected return on scheme assets||(815)||(972)|
The charge for the year has been included in cost of sales. Actuarial gains and losses have been reported in the statement of comprehensive income. The cumulative actuarial gains and losses recognised amount to a loss of £9,509,000 (2013: £8,248,000).
The actual return on scheme assets was a gain of £300,000 (2013: £1,933,000).
The amount included in the balance sheet arising from the Group's obligations in respect of the defined benefit retirement scheme is as follows:
|Present value of defined benefit obligations||(32,395)||(31,061)|
|Fair value of scheme assets||19,862||19,250|
|Deficit in scheme liability recognised in the balance sheet||(12,533)||(11,811)|
The major categories of scheme assets as a percentage of the total scheme assets are as follows:
|Bonds and gilts||62.3||62.0|
Bonds and gilts include a mixture of corporate and government bonds and fixed and index-linked gilts. Approximately nine per cent of bonds have a sub-investment grade credit rating (BB+ or lower) and approximately 64 per cent of gilts are index-linked with 36 per cent being fixed.
Movements in the present value of defined benefit obligations were as follows:
|At start of period||(31,061)||(26,800)|
|At end of period||(32,395)||(31,061)|
Actuarial losses arising from changes in demographic assumptions, changes in financial assumptions and gains or losses arising from experience were losses of £768,000 (2013: £nil), gains of £127,000 (2013: losses of £4,209,000) and losses of £105,000 (2013: gains of £424,000) respectively.
Movements in the fair value of scheme assets were as follows:
|At start of period||19,250||17,248|
|Expected return on scheme assets||815||972|
|At end of period||19,862||19,250|
The Group expects to contribute £83,000 per month to its defined benefit pension scheme in the year to 31 March 2015.
History of experience of gains and losses:
|Experience gains/(losses) on scheme assets (£000)||(515)||961||243||(34)||377|
|Percentage of scheme assets||(2.6%)||5.0%||1.4%||(0.2%)||2.5%|
|Experience (gains)/losses on scheme liabilities (£000)||(105)||424||(512)||1,013||(223)|
|Percentage of the present value of scheme liabilities||(0.3%)||1.4%||(1.9%)||4.1%||(1.0%)|
|Total amount recognised in the consolidated statement of comprehensive income (£000)||(1,261)||(2,824)||(1,369)||(440)||(2,091)|
|Percentage of the present value of scheme liabilities||(3.9%)||(9.1%)||(5.1%)||(1.8%)||(8.9%)|
The weighted average period over which benefits are expected to be paid, or the duration of the liabilities is currently 18 years.