v3.24.1.1.u2
Pensions and other post-retirement benefits (Tables)
 12 Months Ended
Mar. 31, 2024
Employee Benefits [Abstract]  
Disclosure of actuarial assumptions The Company has applied the following financial assumptions in assessing DB liabilities:
UK pensions
US pensions
US other post-retirement benefits
2024
2023
2022
2024
2023
2022
2024
2023
2022
%
%
%
%
%
%
%
%
%
Discount rate – past service
4.87
4.80
2.78
5.15
4.85
3.65
5.15
4.85
3.65
Discount rate – future service
4.92
4.80
2.85
5.15
4.85
3.65
5.15
4.85
3.65
Rate of increase in RPI – past service
3.05
3.17
3.60
n/a
n/a
n/a
n/a
n/a
n/a
Rate of increase in RPI – future service
2.92
3.07
3.33
n/a
n/a
n/a
n/a
n/a
n/a
Salary increases
3.10
3.11
3.47
4.50
4.50
4.60
4.50
4.50
4.60
Initial healthcare cost trend rate
n/a
n/a
n/a
n/a
n/a
n/a
7.10
6.80
6.80
Ultimate healthcare cost trend rate
n/a
n/a
n/a
n/a
n/a
n/a
4.50
4.50
4.50
The table below sets out the projected life expectancies adopted for the UK and US pension arrangements:
UK pensions
US pensions
2024
2023
2022
2024
2023
2022
years
years
years
years
years
years
Assumed life expectations for a retiree age 65
Males
21.5
21.9
22.0
21.6
21.6
21.4
Females
23.5
23.7
23.8
23.9
23.8
23.6
In 20 years:
Males
22.6
23.0
23.2
23.3
23.2
23.1
Females
24.9
25.1
25.2
25.5
25.4
25.3
The table below summarises the split of DB obligations by status for each category of plan:
UK pensions
US pensions
US other
post-retirement benefits
2024
2023
2024
2023
2024
2023
%
%
%
%
%
%
Active members
14
14
37
37
29
33
Deferred members
8
9
10
9
—
—
Pensioner members
78
77
53
54
71
67
Disclosure of amounts recognised in the statement of financial position Amounts recognised in the consolidated statement of financial position
2024
2023
£m
£m
Present value of funded obligations
(17,601)
(18,934)
Fair value of plan assets
19,733
21,246
2,132
2,312
Present value of unfunded obligations
(266)
(292)
Other post-employment liabilities
(52)
(69)
Net defined benefit asset
1,814
1,951
Represented by:
Liabilities
(593)
(694)
Assets
2,407
2,645
1,814
1,951
The geographical split of pensions and other post-retirement benefits is as shown below:
UK pensions
US pensions
US other
post-retirement benefits
Total
2024
2023
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Present value of funded obligations
(10,465)
(10,906)
(4,702)
(5,502)
(2,434)
(2,526)
(17,601)
(18,934)
Fair value of plan assets
11,782
12,578
5,320
6,060
2,631
2,608
19,733
21,246
1,317
1,672
618
558
197
82
2,132
2,312
Present value of unfunded obligations
(56)
(58)
(210)
(234)
—
—
(266)
(292)
Other post-employment liabilities
—
—
—
—
(52)
(69)
(52)
(69)
Net defined benefit asset
1,261
1,614
408
324
145
13
1,814
1,951
Represented by:
Liabilities
(56)
(58)
(210)
(234)
(327)
(402)
(593)
(694)
Assets
1,317
1,672
618
558
472
415
2,407
2,645
1,261
1,614
408
324
145
13
1,814
1,951
Disclosure of amounts recognised in the income statement and statement of other comprehensive income Amounts recognised in the income statement and statement of other comprehensive income
The expense or income arising from all Group retirement benefit arrangements recognised in the Group income statements is shown below:
2024
2023
2022
£m
£m
£m
Included within operating costs
Administration costs
22
19
20
Included within payroll costs
Defined benefit plan costs:
Current service cost
143
194
223
Past service cost – augmentations and redundancies
9
8
11
Gains on settlement
(30)
(45)
—
122
157
234
Included within finance income and costs
Net interest income
(100)
(85)
(2)
Total included in income statement1
44
91
252
Remeasurement (losses)/gains of pension assets and post-retirement benefit obligations
(218)
(1,364)
2,481
Exchange adjustments
(6)
41
7
Total included in the statement of other comprehensive income²
(224)
(1,323)
2,488
1.Amounts shown in the table above include operating costs of £nil (2023: £nil; 2022: £4 million); payroll costs of £nil (2023: £nil; 2022: £10 million); and net interest income of £nil
(2023: £nil; 2022: £2 million) presented within profit from discontinued operations. These amounts all relate to UK pensions.
2.Amounts shown in the table above include remeasurements of pension assets and post-retirement benefit obligations of £nil (2023: £nil; 2022: £309 million gain) presented within
discontinued operations. These amounts all relate to UK pensions.
The geographical split of pensions and other post-retirement benefits is shown below:
UK pensions
US pensions
US other post-retirement benefits
2024
2023
2022
2024
2023
2022
2024
2023
2022
£m
£m
£m
£m
£m
£m
£m
£m
£m
Included within operating costs
Administration costs
13
9
11
7
8
7
2
2
2
Included within payroll costs
Defined benefit plan costs:
Current service cost
45
69
83
72
88
101
26
37
39
Past service cost – augmentations
and redundancies
9
8
11
—
—
—
—
—
—
Gains on settlement
—
—
—
(30)
(45)
—
—
—
—
54
77
94
42
43
101
26
37
39
Included within finance income and costs
Net interest (income)/cost
(84)
(64)
(7)
(13)
(21)
—
(3)
—
5
Total included in income statement
(17)
22
98
36
30
108
25
39
46
Remeasurement (losses)/gains of pension assets
and post-retirement benefit obligations
(474)
(1,183)
1,577
99
(242)
532
157
61
372
Exchange adjustments
—
—
—
(5)
36
11
(1)
5
(4)
Total included in the statement of other
comprehensive income
(474)
(1,183)
1,577
94
(206)
543
156
66
368
Schedule of reconciliation of the net defined benefit asset (liability) Reconciliation of the net defined benefit asset
UK pensions
US pensions
US other
post-retirement benefits
Total
2024
2023
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Opening net defined benefit asset
1,614
2,590
324
484
13
1
1,951
3,075
Income/(cost) recognised in the income statement
(including discontinued operations)
17
(22)
(36)
(30)
(25)
(39)
(44)
(91)
Remeasurement and foreign exchange effects recognised
in the statement of other comprehensive income
(474)
(1,183)
94
(206)
156
66
(224)
(1,323)
Employer contributions
118
197
26
76
21
11
165
284
Other movements
3
2
—
—
(20)
(26)
(17)
(24)
Reclassification to held for sale (note 10)
(17)
30
—
—
—
—
(17)
30
Closing net defined benefit asset
1,261
1,614
408
324
145
13
1,814
1,951
Changes in the present value of defined benefit obligations (including unfunded obligations)
The table below shows the movement in defined benefit obligations across our DB plans over the year.
UK pensions
US pensions
US other
post-retirement benefits
Total
2024
2023
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Opening defined benefit obligations
(10,964)
(14,275)
(5,736)
(6,779)
(2,526)
(2,813)
(19,226)
(23,867)
Current service cost
(45)
(69)
(72)
(88)
(26)
(37)
(143)
(194)
Interest cost
(536)
(334)
(258)
(252)
(117)
(111)
(911)
(697)
Actuarial (losses)/gains – experience
(2)
(235)
(34)
(17)
73
48
37
(204)
Actuarial gains/(losses) – demographic assumptions
98
135
12
5
(4)
10
106
150
Actuarial gains/(losses) – financial assumptions
165
3,167
190
818
(7)
443
348
4,428
Past service cost – augmentations and redundancies
(9)
(8)
—
—
—
—
(9)
(8)
Liabilities extinguished on settlements
—
—
543
616
—
—
543
616
Medicare subsidy received
—
—
—
—
(26)
(28)
(26)
(28)
Employee contributions
(10)
(10)
—
—
—
—
(10)
(10)
Benefits paid
710
711
312
426
152
153
1,174
1,290
Exchange adjustments
—
—
131
(465)
58
(191)
189
(656)
Reclassification from other post-employment liabilities
—
—
—
—
(11)
—
(11)
—
Reclassification to held for sale (note 10)
72
(46)
—
—
—
—
72
(46)
Closing defined benefit obligations
(10,521)
(10,964)
(4,912)
(5,736)
(2,434)
(2,526)
(17,867)
(19,226)
Changes in the value of plan assets
The table below shows the movement in pension assets across our DB plans over the year.
UK pensions
US pensions
US other
post-retirement benefits
Total
2024
2023
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Opening fair value of plan assets
12,578
16,865
6,060
7,263
2,608
2,885
21,246
27,013
Interest income
620
398
271
273
120
111
1,011
782
Return on plan assets (less than)/in excess of interest
(735)
(4,250)
(69)
(1,048)
95
(440)
(709)
(5,738)
Administration costs
(13)
(9)
(7)
(8)
(2)
(2)
(22)
(19)
Assets distributed on settlements
—
—
(513)
(571)
—
—
(513)
(571)
Employer contributions
118
197
26
76
21
11
165
284
Employee contributions
10
10
—
—
—
—
10
10
Benefits paid
(707)
(709)
(312)
(426)
(152)
(153)
(1,171)
(1,288)
Exchange adjustments
—
—
(136)
501
(59)
196
(195)
697
Reclassification to held for sale (note 10)
(89)
76
—
—
—
—
(89)
76
Closing fair value of plan assets
11,782
12,578
5,320
6,060
2,631
2,608
19,733
21,246
Actual return on plan assets
(115)
(3,852)
202
(775)
215
(329)
302
(4,956)
Expected contributions to plans
in the following year
108
99
28
36
15
14
151
149
Disclosure of asset allocations The allocation of assets by asset class is set out below. Within these asset allocations there is significant diversification across regions, asset
managers, currencies and bond categories.
UK pensions
2024
2023¹
2022¹
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Equities
576
153
729
475
179
654
1,458
324
1,782
Corporate bonds
1,910
—
1,910
1,892
—
1,892
2,741
—
2,741
Government securities and liability-
driven investments
—
5,259
5,2592
762
4,906
5,6682,3
786
5,768
6,5542,3
Property
—
6794
679
23
8604
883
122
1,0024
1,124
Diversified alternatives
669
572
1,241
708
680
1,388
1,334
582
1,916
Buy-in/bulk annuity policies
—
2,060
2,060
—
2,126
2,1265
78
2,706
2,7845
Longevity swap
—
(94)
(94)
—
(88)
(88)
—
(80)
(80)
Cash and cash equivalents
3
—
3
8
—
8
38
—
38
Other (including net current assets and liabilities)
—
(5)
(5)
59
(12)
47
16
(10)
6
3,158
8,624
11,7826
3,927
8,651
12,5786
6,573
10,292
16,8656
1.Comparative amounts have been represented to reflect the reclassification of assets associated with liability driven investment strategies as unquoted following an internal asset
categorisation review.
2.Included within government securities and liability-driven investments above is £2.7 billion (2023: £3.4 billion; 2022: £6.1 billion) of repurchase agreements. These are used to increase
the market exposure of the liability-matching portfolios.
3.This asset class has been redefined to include liability driven investments totalling £4,906 million (2022: £5,857 million). These were previously allocated in other asset classes, primarily
buy-in/bulk annuity policies.
4.Includes £288 million (2023: £304 million; 2022: £283 million) of investments in forestry funds.
5.This asset class has been redefined to only include the value of buy-in/bulk annuities and therefore has been restated to exclude the value of liability-driven investments.
6.The fair value of plan assets includes employer-related investment exposure of £44 million (2023: £23 million; 2022: £32 million).
US pensions
2024
2023¹
2022¹
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Equities
99
1,224
1,323
154
1,346
1,500
272
1,904
2,176
Corporate bonds
1,987
403
2,390
2,147
528
2,675
2,311
697
3,008
Government securities
360
444
804
410
514
924
335
715
1,050
Property
—
237
237
—
299
299
—
295
295
Diversified alternatives
54
502
556
85
550
635
142
546
688
Cash and cash equivalents
9
—
9
16
—
16
31
—
31
Other (including net current assets and liabilities)
1
—
1
7
4
11
12
3
15
2,510
2,810
5,320
2,819
3,241
6,060
3,103
4,160
7,263
1.Comparative amounts have been represented to reflect the reclassification of infrastructure assets following an internal asset categorisation review.
US other post-retirement benefits
2024
2023
2022
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Equities
37
524
561
74
510
584
185
1,013
1,198
Corporate bonds
1,351
46
1,397
1,332
2
1,334
723
2
725
Government securities
410
1
411
431
2
433
511
2
513
Diversified alternatives
92
9
101
100
9
109
144
120
264
Other1
—
161
161
1
147
148
—
185
185
1,890
741
2,631
1,938
670
2,608
1,563
1,322
2,885
1.Other primarily comprises insurance contracts.
The approximate investment allocations for our plans at 31 March 2024 are as follows:
UK pensions
US pensions
US other post-
retirement benefits
%
%
%
Return-seeking assets
22
40
31
Liability-matching assets
78
60
69
Disclosure of most significant risks associated with DB plans The most significant risks associated with the DB plans are as follows:
Main risks
Description and mitigation
Investment risk
The plans invest in a variety of asset classes, with actual returns likely to differ from the underlying discount rate adopted,
impacting on the funding position of the plan through the net balance sheet asset or liability. Each plan seeks to balance the
level of investment return required with the risk that it can afford to take, to design the most appropriate investment portfolio.
Changes in bond yields
Liabilities will fluctuate as yields change. Volatility of the net balance sheet asset or liability is controlled through liability-
matching strategies. The investment strategies allow for the use of synthetic as well as physical assets to be used to hedge
interest rate risk.
Inflation risk
Changes in inflation will affect current and future pensions but are partially mitigated through investing in inflation-matching
assets and hedging instruments as well as bulk annuity buy-in policies. The investment strategies allow for the use of
synthetic as well as physical assets to be used to hedge inflation risk.
Member longevity
Improvements in life expectancy will lead to pension payments being paid for longer than expected and benefits ultimately
being more expensive. This risk has been partly mitigated by scheme investment transactions including a longevity insurance
contract (longevity swap) for NGEG of ESPS and two buy-in policies for Section A of NGUKPS.
Counterparty risk
This is managed by having a diverse range of counterparties and through having a strong collateralisation process (including
for the longevity swap held by NGEG of ESPS). Measurement and management of counterparty risk is delegated to the
relevant investment managers. For our bulk annuity policies, various termination provisions were introduced in the contracts,
managing our exposure to counterparty risk. The insurers’ operational performance and financial strength are monitored on
a regular basis.
Default risk
Debt investments are predominantly made in regulated markets in assets considered to be of investment grade. Where
investments are made either in non-investment grade assets or outside of regulated markets, investment levels are kept
to prudent levels and subject to agreed ranges, to control the risk.
Liquidity risk
The pension plans hold sufficient cash to meet benefit requirements, with other investments being held in liquid or realisable
assets to meet unexpected cash flow requirements. These could include collateral calls relating to the plans’ liability-
matching assets which could result from extreme market movements. Should the plans not have sufficient liquidity to meet
cash flow requirements, they could be forced to take sub-optimal investment decisions such as selling assets at a reduced
price. The plans do not borrow money, or act as guarantor, to provide liquidity to other parties (unless it is temporary).
Currency risk
Fluctuations in the value of foreign denominated assets due to exposure to currency exchange rates are managed through
currency hedging overlay and currency hedging carried out by some of the investment managers.