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5 Pensions, post-retirement benefits, profit sharing and other staff costs
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Pensions |
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Barclays provides pension plans for employees in most parts of the world. The majority of UK staff are members of The Barclays
Bank UK Retirement Fund (the UK Fund). Other UK staff are covered by broadly comparable schemes. The assets of the UK Fund
are held separately from the assets of the Group and are administered by a trustee. The UK Fund comprises two sections:
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The Retirement Investment Scheme (RIS) |
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A defined contribution plan for new joiners. Between 5.5% and 13.5% of pensionable pay is credited to members’ retirement
accounts; precise amounts are dependent upon each member’s age and contribution decision. In addition the costs of ill-health
retirements and death in service benefits are generally borne by the UK Fund.
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The 1964 Pension Scheme |
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Most employees recruited before July 1997 are members of this non-contributory defined benefit scheme. Pensions are
calculated by reference to service and pensionable salary and are normally subject to a deduction from State pension age.
Formal actuarial valuations of the UK Fund are carried out triennially by a professionally qualified independent actuary using
the attained age method. The most recent valuation was conducted as at 30th September 1998 and expresses the assets
and liabilities at market values (previous valuations showed actuarially assessed values). This change did not materially affect
the financial balance of the UK Fund as reported in this note. The market value of the assets attributable to the 1964 Pension
Scheme at the valuation date was £9,546m and the valuation revealed a surplus of assets over the 1964 Pension Scheme
accrued liabilities of 13% after allowing for expected future salary increases. This surplus was estimated to be sufficient to allow
the Bank to continue its contribution holiday for both sections at least until the next valuation due in 2001. Protected Rights
contributions in respect of RIS members will be paid as required by the contracting-out regulations. The principal financial
assumptions underlying the valuation made allowance for the taxation changes introduced in the July 1997 Budget and were: |
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Price inflation |
3.0% |
Earnings growth |
4.5%* |
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Dividend growth |
3.75% |
Return on new investments |
7.25% |
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Pension increases |
3.0% |
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* 4.0% for the first three years from the valuation date.
In calculating the surplus of assets over accrued liabilities, assets were taken at their market value and a discount rate of 6.5%
p.a. was used to value the 1964 Pension Scheme accrued liabilities. This rate of 6.5% was derived by taking a weighted average
of the market yields on the day, weighting by reference to the UK Fund’s strategic allocation; for the equity component
allowance was made for future dividend growth. In 1999 benefit improvements were granted which increased accrued liabilities
on the valuation basis by approximately 1% and added marginally to future service costs. In 2000 the assets and liabilities of the
Barclays Capital Pension Scheme (final salary section) were transferred to the Fund and the transferring members joined the
1964 Pension Scheme. In view of the continuing financial health of the UK Fund no adjustment has been made to the current
contribution holiday, which commenced in January 1998. The contribution holiday is still expected to continue at least until the
next valuation due as at 30th September 2001. The pensions charge in the accounts will be reduced over the remaining service
lives of the members to take account of the surplus.
Without the benefit of the surplus, the 1964 Pension Scheme charge would be some 16.5% of pensionable salaries (on the
projected unit method) assessed using the assumption regarding return on new investments, whilst contributions to the RIS
would equal the contributions described above plus the costs of ill-health and death in service benefits.
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2000 |
1999 |
1998 |
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£m |
£m |
£m |
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The Pensions costs vary from regular costs as follows (1964 & RIS Schemes): |
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Regular costs |
161 |
185 |
187 |
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Variation from regular costs (including interest) |
(226) |
(183) |
(186) |
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(65) |
2 |
1 |
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Of the total regular cost in 2000 of £161m, £148m relates to the 1964 Pension Scheme.
The approach taken to calculating the pensions charge in the accounts for the 1964 Pension Scheme is to take assets and
liabilities at actuarially assessed values rather than market values. The assumptions used to derive the 1964 Pension Scheme
pensions charge differ from those shown above in that returns on new investments are assumed to be 8.25% p.a. which
is also the rate used to value accrued liabilities, and dividend growth is assumed to be 5% p.a. (1999 4.5%). As a result of this,
the assets attributable to the 1964 Pension Scheme have been valued at £8,544m for accounting purposes, producing a surplus
of assets over accrued liabilities on this basis of 37%, after allowing for expected future salary increases and resulting in the
variation from regular costs of £226m.
Total pension costs of the Group are summarised as follows: |
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2000 |
1999 |
1998 |
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£m |
£m |
£m |
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The Barclays Bank UK Retirement Fund |
(65) |
2 |
1 |
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Other UK pension schemes |
9 |
14 |
14 |
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Overseas pension schemes |
25 |
22 |
22 |
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(31) |
38 |
37 |
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For the purposes of assessing the pension charge for the Barclays Bank (1951) Pension Fund – a defined benefit scheme for
overseas employees of the Bank similar in design to the 1964 Pension Scheme – the same approach and assumptions as
described above for the 1964 Pension Scheme have been adopted and a credit of £9m is included in Other UK pension schemes.
Note 61 provides additional disclosures required by US Statement of Financial Accounting Standards No. 132.
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Post-retirement benefits |
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Some 10,500 UK and US pensioners are provided with private health care on similar terms to eligible staff. In addition,
3,500 members of staff have satisfied the qualification criteria and may therefore also become eligible for this benefit on
retirement. There are a further 5,200 Barclays Bank PLC pensioners who have retired since 30th June 1999 and other
employees, who are eligible for post retirement private health care benefit which is being progressively withdrawn over the
period to 30th June 2008.
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Profit sharing scheme |
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Participants in the scheme are employees of the Bank, including executive Directors and employees of most of its UK subsidiary
undertakings but excluding staff and Directors employed by Barclays Capital and Barclays Global Investors. The year 2000
will be the last year the scheme is operated. Participants can elect to take their entitlement either in cash after deduction of
income tax, or in ordinary shares of Barclays PLC of the equivalent current market value up to a certain annual value (currently,
£3,000 or 10% of salary, if greater, with a maximum of £8,000). If entitlements in the form of shares are held by the Trustee
of the UK Profit Sharing Schemes for three years, the participant will be eligible for income tax relief in respect of their shares.
Shareholders approved the introduction of the All-Employee Share Ownership Plan (AESOP) at the 2000 Annual General
Meeting. In 2001, Barclays intends to introduce the partnership shares element of the AESOP.
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Other staff costs |
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Other staff costs comprise medical healthcare costs, social welfare taxes, staff transfer costs, redundancy payments and other
sundry employee costs.
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