LPC Accounting - Independant FTSE Pension Crisis Summary 2015

LCP ACCOUNTING FOR PENSIONS 2015
2015 sees yet more changes in the UK
pensions landscape. With new reporting
and governance requirements on the
horizon, our 22nd annual survey looks
at how FTSE 100 companies manage
their pension risks.

2
For further information please contact Bob Scott, Nick Bunch or the partner
who normally advises you.
This report may be reproduced in whole or in part, without permission,
provided prominent acknowledgement of the source is given. The report
is not intended to be an exhaustive analysis of IAS19. Although every
effort is made to ensure that the information in this report is accurate,
Lane Clark & Peacock LLP accepts no responsibility whatsoever for any
errors, or the actions of third parties. Information and conclusions are
based on what an informed reader may draw from each company’s
annual report and accounts. None of the companies have been contacted
to provide additional explanation or further details.
View a full list of our services at www.lcp.uk.com
© Lane Clark & Peacock LLP August 2015
We would like to thank those from LCP who have made this report possible:
Catriona Armstrong
Nick Bunch
Richard Chini
Emma Colpus
Jeremy Dell
Peter Fitchett
Linda Gilhooly
Tricia Gulliver
Sam Jenkins
Claire Jones
Geraint Jones
Andrew Keenan
Stuart Levy
Sarah Lossin
Dorothy Mendoza
Martin Mercer
Paul Meredith
Chris Mitcheson
Holly Moffat
David Poynton
Charlotte Quarmby
Robin Rangeley
Max Root
Bob Scott
Joanne Stewart
Laura Strachan
Sam Tomes
Alex Waite
Shaun Wood
Chris Wragg
22

LCP Accounting for Pensions 2015
p5 1. Executive Summary
p8 2. Analysis of FTSE 100 accounting disclosures
p10 2.1 Introduction
p10 2.2 The FTSE 100 accounting deficit
p14 2.3 How have companies been managing their
pension commitments?
p18 2.4 Analysis of pension disclosures
p36 Appendix 1 - FTSE 100 accounting disclosure listing
p40 Appendix 2 - FTSE 100 accounting risk measures
3

Although FTSE100 companies
have reduced their overall pension
contributions again, many still
have big schemes with big deficits.
Bob Scott
PARTNER, LCP
Welcome to our 22nd annual
survey of FTSE 100 companies’
pension disclosures.

AT A GLANCE:
The state of FTSE 100 pensions
THE MOVE AWAY FROM
DEFINED BENEFIT PENSION
PROVISION CONTINUES
PENSION CONTRIBUTIONS
The UK’s largest employers continue to
reduce their pension contributions
£12.5bn
2014
2013
£14.8bn
2012
£16.8bn
RISK - LIABILITIES AND DEFICITS
Pension schemes potentially present
significant financial risks to their sponsors
10% chance that the deficits could increase by
£25bn or more over the next 12 months
£553bn
£528bn
liabilities
of nearly
£350bn
10
companies
combined
pension
deficits
of nearly
£40bn
10
companies
combined
pension
disclosed a
pension surplus
at their 2014
accounting date
compared to
21 last year
FUNDING IMPROVED
24
FTSE
100
companies
FTSE
100
companies
providing any form of
defined benefit pension
provision as standard to
new recruits
3
Only
What is the overall position for DB schemes?
No UK defined benefit
(DB) scheme
DB scheme closed to accrual
DB scheme - final salary,
with cap on salary increases
DB scheme - final salary,
no cap on salary increases
DB scheme - non final salary
14
23
14
36
13
Total UK IAS19
liabilities
Total assets
FTSE 100 overall (at 31 July 2015)
5LCP Accounting for Pensions 2015
1. Executive Summary

6 LCP Accounting for Pensions 2015
Contributions down again
ƒƒ The UK’s largest employers continue to reduce their pension
contributions. Total contributions to defined benefit schemes were
£12.5 billion in 2014, compared to £14.8 billion in 2013 and £16.8 billion in
2012.
Pensions: a potential risk for some
ƒƒ Yet those pension schemes potentially present significant financial risks
to their sponsors. Our research shows that:
–– 10 companies had combined pension liabilities of nearly £350 billion;
–– 10 companies had combined pension deficits of nearly £40 billion; and
–– there is a 10% chance that those deficits could increase by at least a
further £25 billion over the next 12 months.
ƒƒ From October, new reporting rules will require companies not only to
disclose their principal risks but to indicate which of those risks could
potentially stop them trading and then to identify the steps they have
taken to mitigate those risks.
Net deficit slightly lower
ƒƒ We estimate that the FTSE 100 as a whole had an overall (net) IAS19
deficit in respect of UK pensions of £25 billion at 31 July 2015, with total
IAS19 liabilities of £553 billion against assets of £528 billion.
A number of companies that
paid large contributions in
previous years have reverted
to more normal levels.

Liabilities rise to record levels
ƒƒ Recent falls in corporate bond yields have caused reported liability
values to rise to record levels - for example, in its December 2014
accounts Royal Dutch Shell reported pension liabilities of more than
$100 billion and the accounting liabilities of BT Group’s main pension
scheme were over £50 billion at the end of March 2015.
Defined benefits - the end of the road
ƒƒ With almost all new FTSE 100 employees now being auto-enrolled into
defined contribution pension schemes, the move away from defined
benefit pension provision has continued. This will accelerate when
contracting out ceases in April 2016.
ƒƒ Tesco currently provides new joiners with access to a career average
revalued earnings (CARE) scheme but has recently announced plans to
close this to new joiners and to future accrual, which would leave only
3 companies providing new employees with defined benefit pensions as
standard.
ƒƒ A number of other FTSE 100 companies, including Anglo American
and Standard Life announced that they would be closing their defined
benefit schemes to existing members, leaving a dwindling number
of companies with an ever reducing number of employees accruing
additional pension on a defined benefit basis.
ExecutiveSummary
What steps are companies taking to address pension risk?
Pension risk may well be one of the main risks for FTSE 100 companies with legacy
defined benefit pension schemes.
See
pages
14 - 17

8
Content
p8 2. Analysis of FTSE 100 accounting disclosures
p10 2.1 Introduction
p10 2.2 The FTSE 100 accounting deficit
p14 2.3 How have companies been managing their
pension commitments?
p18 2.4 Analysis of pension disclosures

Since January 2005, we estimate that
the total pension liability of FTSE100
companies has almost doubled.
Bob Scott
Partner
LCP
AnalysisofFTSE100accountingdisclosures
When yields fall, liability values increase.
2%
3%
4%
5%
6%
7%
8%
December
2004
December
2005
December
2006
December
2007
December
2008
December
2009
December
2010
December
2011
December
2012
December
2013
December
2014
Nominalannualyield(%pa)
UK AA rated corporate bond yields
Source: iBoxx
2005 2015
Source: iBoxx
45%
approximate
decrease in nominal
corporate bond
yields over 10 years.

2. Analysis of FTSE 100 accounting disclosures
10
2. Analysis of pension disclosures
2.1. Introduction
We have analysed the defined benefit pension disclosures for 87
FTSE 100 companies reporting in 2014. 12 of the FTSE 100 have been
excluded as they do not sponsor a material defined benefit pension
scheme and Dixons Carphone has also been excluded as no post-merger
accounts are available for 2014. A full list and summary details of the
87 companies’ key pension disclosures are set out in appendix 1.
The information and conclusions of this report are based solely on detailed
analysis of the information that companies have disclosed in their annual
report and accounts and other publicly available information. We do
not approach companies or their advisers for additional information or
explanation.
We have concentrated on the financial position of the defined benefit
pension schemes in which the companies’ employees and former
employees participate. Some companies offer post-retirement healthcare,
which we have excluded from our analysis, where possible. Overseas
pension arrangements have been included, except where otherwise
indicated.
All of the companies analysed have reported under international
accounting standards (IAS19 for pension costs) as required under
EU regulations.
2.2. The FTSE 100 accounting deficit
We estimate that the combined FTSE 100 pension deficit in respect of
UK liabilities was £25 billion at the end of July 2015, reflecting total IAS19
liabilities of £553 billion against assets of £528 billion.
Since January 2005, we estimate that the total pension liability of
FTSE 100 companies has almost doubled. We have included a list of the
ten companies with the largest disclosed pension liabilities in appendix 2.
£25
billionThe estimated UK pension
deficit for FTSE 100
companies under IAS19.

Over the last 5 years the total
deficit has fluctuated between
£10bn and nearly £60bn.
A combination of strong investment returns, payment of deficit
contributions and low levels of inflation has offset the impact of significant
falls in bond yields, which have led to a material increase in reported
liability values.
Overall, the total deficit has reduced by £12 billion from the position at
30 June 2014. However, the change in deficit or surplus for a particular
company’s pension scheme depends heavily on its investment strategy
and, in particular, on the extent to which it has been hedged against
changes in long-term interest rates.
-70
-60
-50
-40
-30
-20
-10
0
10
Jun2010
Dec2010
Jun2011
Dec2011
Jun2012
Dec2012
Jun2013
Dec2013
Jun2014
Dec2014
Jun2015
£billion
Estimated IAS19 position for UK schemes of FTSE 100 companies
The chart below shows how the accounting deficit has developed over
the past five years. Our figures include unfunded pension promises but
exclude, where possible, the overseas pension schemes sponsored by
FTSE 100 companies and any employee benefits other than pensions.

12
Corporate bond yields
Under IAS19, pension liabilities are valued by reference to the yield
available on high quality corporate bonds – all else being equal, this means
that when yields fall, liability values increase and vice versa.
The chart below shows how UK corporate bond yields have varied since
the start of 2008, just prior to the height of the UK “credit crunch”.
2%
3%
4%
5%
6%
7%
8%
December
2007
December
2008
December
2009
December
2010
December
2011
December
2012
December
2013
December
2014
UK AA rated corporate bond yields
Source: iBoxx
Since late 2008 – when the yield on the iBoxx AA over 15 year corporate
bond index peaked at more than 7.5% pa – there has been a relatively
constant fall in yields – with the index hitting a low of just under 3% pa in
January 2015.
Our 2008 survey showed that FTSE 100 companies had IAS19 pension
liabilities of £368 billion in July 2008. Seven years later that figure has
risen by over 50% to £553 billion, and companies have pumped in more
than £50 billion of deficit contributions in the meantime.
60%The reduction in the yield
available on corporate
bonds since the height of
the credit crunch in 2008.

Pension risk – the viability statement
The increase in the size of reported liabilities illustrates the potentially
material level of pension risk being run by a number of FTSE 100
companies. Our research shows that:
ƒƒ 10 companies reported combined pension liabilities of nearly
£350 billion;
ƒƒ 10 companies reported combined pension deficits of nearly £40 billion;
and
ƒƒ there is a 10% chance that those deficits could increase by at least a
further £25 billion over the next 12 months due to financial factors alone.
Under current accounting standards, companies are already required to
disclose details of the risks associated with their pension schemes in their
accounts. However, from October 2015, additional reporting requirements
will come into force under an updated version of the UK corporate
governance code.
This will require the directors of most listed companies to confirm that
they have carried out a robust assessment of the main risks facing their
business, including those that would threaten its solvency. Furthermore,
there is a new requirement to include a “viability statement” in the annual
accounts, confirming whether the directors expect the company will be
able to continue in operation, taking into account its current position and
principal risks.
Pension risk may well be one of the main risks for FTSE 100 companies
with legacy defined benefit pension schemes. The new requirement may
therefore increase the level of disclosure required in relation to this.
Based on the information in existing accounting disclosures,
BAE Systems, BT Group, International Airlines Group, Sainsbury’s and
RSA Insurance Group are companies that may be running significant levels
of pension risk relative to the size of their business.
Pension risk may well be one of the
main risks for FTSE 100 companies
with legacy defined benefit pension
schemes.

14
2.3. How have companies been managing their pension commitments?
Reductions in defined benefit pension provision
None of the FTSE 100 companies we have analysed provide traditional
final salary pensions to new employees and there are only 4 FTSE 100
companies providing any form of defined benefit pension provision
as standard to new recruits. These are Diageo, Johnson Matthey and
Morrisons, which provide cash balance schemes, and Tesco, which
provides a career average revalued earnings (“CARE”) scheme. In its 2015
accounts Tesco reported that it was in consultation to close this CARE
scheme to both new entrants and future accrual.
A number of other companies stated that they had either closed their
defined benefit pension scheme to future accrual during the last year, or
had plans to do so in the near future:
ƒƒ Anglo American announced that its only remaining UK plan with
continuing accrual will close on 30 September 2015.
ƒƒ Hammerson closed its pension scheme to accrual in July 2014 and as a
result disclosed a £3 million gain in its 2014 accounts.
ƒƒ Morrisons reported that it was consulting on the closure of its 2 historic
CARE schemes to future accrual.
ƒƒ Standard Life announced that it will close its pension plan to accrual
from April 2016, replacing it with an enhanced defined contribution
pension plan.
In addition, HSBC, Severn Trent and Weir Group have all previously
reported that they have reached agreement to close their pension
schemes to future accrual during 2015.
The move away from
defined benefit pension
provision continues apace.

With the move towards defined contribution pension provision firmly
established, other changes have been made in recent years that reduce
the employer cost of the remaining defined benefit pensions still being
built up. For example, in its March 2015 accounts, Babcock disclosed that it
had capped pensionable salaries and increased employee contributions to
one of its three main pension schemes, with similar changes expected to
come into effect in its other two main schemes from June 2015.
The chart below shows the numbers of companies providing continuing
defined benefit pension provision, after allowing for the changes listed
above. These changes will leave only 36 FTSE 100 companies providing
traditional final salary pensions to any of their employees.
No UK defined benefit (DB) scheme14
23
14
36
13
DB scheme closed to accrual
DB scheme - final salary,
with cap on salary increases
DB scheme - final salary,
no cap on salary increases
DB scheme - non final salary
With the ability to contract out of the state pension system coming to
an end in April 2016, we are likely to see an acceleration in the number
of companies closing their pension schemes to future accrual, in order
to mitigate the increase in national insurance cost that arises when the
current rebate most receive disappears.

36FTSE 100 companies
providing traditional final
salary pension accrual to
any employees.

16
Liability management exercises
Many companies are naturally now placing increased focus on managing
their legacy pension arrangements and removing risk from their balance
sheet. One popular way of achieving this is to carry out a pension increase
exchange (“PIE”) exercise, where members of the pension scheme are
given the option to exchange some or all of the future increases on
their pension in return for a higher current level of pension. This reduces
inflation risk and can result in a cost saving, if members accept a deal
which is less than fair value.
Several FTSE 100 companies carried out liability management exercises
during 2014:
ƒƒ BAE Systems reported that it carried out a PIE exercise in its main
scheme in May 2014, with 38% of pensioners opting to exchange future
increases on part of their pensions for higher non-increasing pensions.
ƒƒ Centrica offered pensioners the option to receive a higher pension in
return for giving up certain future increases linked to RPI, which gave
rise to a past service credit of £10 million.
ƒƒ GKN reported that it had commenced a PIE exercise to mitigate inflation
risk, which would conclude in early 2015.
ƒƒ Taylor Wimpey has completed a flexible retirement offer for deferred
members, which allowed participants to realise part of their pension at
an earlier date than previously anticipated. This has resulted in
£25 million of pension liability being transferred out of its pension
schemes.
ƒƒ On the back of a PIE exercise for pensioners which resulted in a 28%
take up rate, TUI Travel has introduced pension increase exchange as a
standard retirement option for active and deferred members, with a
£28 million past service credit arising on the basis of expected future
take up rates.
Liability management
exercises can be a “win-win”
for companies and members.

Pension freedoms and flexibilities
It is too early for companies to have reported in their accounts on the
impact of the 2014 budget changes. However, since April 2015, defined
contribution schemes have become more attractive as individuals can
access their pension savings with much greater flexibility than previously.
This gives rise to opportunities for companies to manage their defined
benefit liabilities by giving members the opportunity to access those
flexibilities. This could be via partial transfer values at retirement; full
commutation of smaller pensions; or simply by offering to pay for members
to take financial advice on their options.
De-risking of investment strategies
As pension schemes mature and the time horizon for payment of benefits
decreases, companies and pension scheme trustees have typically looked
to reduce the investment risks posed by the pension scheme.
This is of increasing importance as schemes close to future accrual and
ongoing contributions reduce because pensions and other benefits then
need to be paid out of investment income or by realising assets.
With increasingly complex investment strategies – some of which are not
fully explained in accounting disclosures – it has become more difficult to
split FTSE 100 pension scheme assets into bonds and equities. However,
the general trend away from equities does appear to have continued with a
modest movement of assets out of equities and into bonds and other asset
classes during 2014. This is illustrated in the chart below.
Equities
Bonds
Other
D
ec-02
D
ec-03
D
ec-04
D
ec-05
D
ec-06
D
ec-07
D
ec-08
D
ec-09
D
ec-10
D
ec-11
D
ec-12
D
ec-13
D
ec-14
0%
20%
40%
60%
80%
100%
30%The average allocation of
FTSE 100 pension scheme
assets to equities.
Overall asset allocation for FTSE 100 companies with December year-ends

18
2.4. Analysis of pension disclosures
The average pensions note runs to just over five pages, with most
companies also having several paragraphs of pension commentary in the
main body of their reports. The longest disclosure was produced by BP,
which covered 10 pages of its 2014 report.
Funding levels
IAS19 takes a snapshot of the accounting surplus or deficit at the
company’s year-end and in most cases this is the number that appears on
the balance sheet.
However, in some cases, complex rules under IAS19 can result in a
restriction on the asset recognised on the balance sheet where a pension
scheme is in surplus, or a higher liability being recognised as a result of
the funding agreements in place with the pension scheme trustees. 18
companies were affected by this issue in 2014 and in some cases the
amounts involved were material – for example, Scottish Southern
Energy and Standard Life added £201 million and £414 million to their
balance sheets respectively.
Recently proposed changes to the IAS19 accounting standard may mean
that these adjustments are more common in future. However, the impact
will depend on the precise wording of each company’s pension scheme
rules.
Of the 87 FTSE 100 companies we analysed, 24 disclosed pension assets
equal to or in excess of accounting liabilities, which compares to 21 of
these companies last year. This general improvement was despite the large
fall in corporate bond yields, and arose due to strong investment returns
over 2014 for schemes that had significant levels of hedging against falls
in interest rates, either through investment in government and corporate
bonds, or as a result of holding interest rate swaps.
Royal Mail disclosed the highest 2014 funding level – 183% as at
31 March 2014. 38 companies reported being less than 90% funded on an
accounting basis at their 2014 year-end. This is the same number as in
2013.
24FTSE 100 companies
disclosed a pension surplus at
their 2014 accounting date.

Changes over 2014
The chart below shows how worldwide funding levels have changed
over the year for the 52 FTSE 100 companies in our report which have
December 2014 year-ends.
Ratio of assets to IAS19 liabilities at end of December (%)
December 2013
December 2014
0
5
10
15
20
Under
60
60
to 69
70
to 79
80
to 89
90
to 99
100
to 109
110
or over
Numberofcompanies
The average reported IAS19 funding level for companies with December
year-ends was 90% in 2014, which remains unchanged from 2013.
We have shown a similar chart for those companies with March year-ends
below – the overall trend is a slight improvement in funding levels between
March 2014 and March 2015.
March 2013
March 2014
March 2015
Ratio of assets to IAS19 liabilities at end of March (%)
0
1
2
3
4
5
6
7
Under
70
70
to 79
80
to 89
90
to 99
100
to 109
110
or over
Numberofcompanies

20
The average reported IAS19 funding level for these companies was 103%
at March 2015 compared with 101% in 2014 and 97% in 2013. Notably,
Royal Mail was 193% funded on an IAS19 basis at 31 March 2015 – the 10%
increase compared to 31 March 2014 being in part due to an investment
strategy that hedges liabilities – including those expected to accrue over
the period until 2017 – against falls in interest rates.
Sources of deficits and surpluses
For the 52 companies with December year-ends, worldwide deficits
increased by £5.1 billion over 2014. This is illustrated in the chart below.
IAS19 sources of deficits and surpluses for companies
with December year-ends only (£ billion)
Benefits earned
Net interest charged
Investment experience
exchange rate differences
New assumptions
experience
Overall movement in the deficit
50 40 30 20 10 0 10 20 30 40 50
Factors increasing deficit Factors decreasing deficit
Contributions
The total contributions paid by these companies (£9.2 billion) more than
covered the net IAS19 value of benefits earned over the year (£5.8 billion)
and the total net interest charge (£1.1 billion). However, increases in IAS19
liability values (£45.8 billion) more than offset the benefits of positive
investment experience (£38.4 billion).
Overall, this has led to an increase in deficits of £5.1 billion for these
companies.

Pension schemes in relation to their sponsoring companies
The chart below shows the size of accounting liabilities relative to
companies’ market capitalisations. The average FTSE 100 pension liability
was 35% of market capitalisation, compared to 36% in 2013, and pension
schemes still pose a very significant risk for certain companies. For
example, International Airlines Group’s accounting liabilities were more
than double the size of its market capitalisation.
Accounting liabilities as a proportion of market capitalisation (%)
0
5
10
15
20
25
Under
5
5
to 14
15
to 24
25
to 49
50
to 74
75
to 99
100
to 149
150
to 199
200
or over
Numberofcompanies
2013
2014
For some companies, even the size of the IAS19 pension scheme deficit
is significant compared to the value of the company itself. BAE Systems’
accounting deficit was over 35% of the value of its market capitalisation at
its 2014 accounting year-end. We have highlighted the ten companies with
largest liabilities compared to market capitalisation in appendix 2.
On average, pension scheme deficits were 5% of market capitalisation,
compared to 4% in 2013.
35%The average size of pension
liabilities compared to market
capitalisation.

22
Pension scheme contributions
FTSE 100 companies paid contributions totalling £12.5 billion into their
defined benefit pension schemes in 2014 of which we estimate just over
half – £7.1 billion – went towards the cost of additional benefit accrual for
current employees.
Whilst this is a significant amount to have been paid, it is a noticeable
reduction from the £14.8 billion of contributions paid in 2013, £16.8 billion
paid in 2012 and £16.9 billion paid in 2011. The fall mainly reflects large
one-off contributions made by a small number of companies to their
pension schemes in previous years. For example, Diageo made a one-off
contribution to its UK pension plan of £400 million in 2013 which was
not repeated in 2014 and the 2012 figures include a £2 billion special
contribution made by BT Group.
The chart below shows how company payments, including those to
defined contribution pension schemes, have changed since 2007.
Employer contributions to pension schemes
Deﬁcit contributions (DB schemes)
Employer service cost (DB schemes)
Employer DC costs
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014
£billion
£2.3 bnThe reduction in employer
contributions to defined
benefit pension schemes
this year.

The ten companies that paid the highest contributions to their defined
benefit pension schemes are shown in appendix 2. RBS and
Royal Dutch Shell were the only companies to pay more than £1 billion
over their 2014 accounting year. Royal Dutch Shell was the only company
to pay more than £1 billion in 2013.
Most companies pay contributions at a rate greater than the IAS19 value of
benefits earned over the year. If the IAS19 assumptions were borne out in
reality, this excess would reduce the IAS19 deficit.
However, twelve companies paid contributions lower than or equal to the
IAS19 value of benefits promised over the year. These were Associated
British Foods, AstraZeneca, Experian, Fresnillo, Intertek Group,
Mondi Group, Royal Dutch Shell, Royal Mail, Sage Group, Schroders,
Standard Life and Tesco.
Some of these companies had IAS19 surpluses but, for others, this analysis
suggests that contributions will need to increase if they are to recover
their IAS19 deficit.
The chart below shows the length of time it would take for companies to
remove their IAS19 deficit based on the contributions paid during 2014, if
the IAS19 assumptions were borne out in practice.
Expected time to pay off IAS19 deﬁcits
2013
2014
0
5
10
15
20
25
30
In
surplus
Less than
5 years
5 to
9.9 years
10 to 14.9
years
15 to 19.9
years
20 years
and over
Numberofcompanies
12companies paid contributions
that were lower than or equal
to the value of benefits built
up over the year.

24
Pension schemes versus shareholders
The chart below shows how dividends paid compare to pension deficits.
Of the 63 FTSE 100 companies that disclosed a pension deficit in 2014,
23 disclosed a deficit that was greater than or equal to the dividends paid
to their shareholders in 2014. However, in 25 cases, the 2014 dividend was
more than double the deficit at the 2014 financial year-end, suggesting
that these companies could pay off their pension scheme deficit relatively
easily if they wanted to.
Percentage of deﬁcit that could be paid off with one year's declared dividends (%)
0
5
10
15
20
Under
50
50
to 99
100
to 149
150
to 199
200
to 249
250
to 299
300
to 349
350
to 399
400
or over
Numberofcompanies
2014
2013
The chart below shows the company contributions paid over companies’
2014 and 2013 accounting years as a percentage of dividends distributed
over these periods and therefore illustrates the amount of cash paid to
pension schemes in preference to shareholders. In 2014, seven companies,
including Lloyds Banking Group and RBS, paid at least as much in pension
contributions as they distributed in dividends during their accounting year.
Contributions paid as a proportion of dividends paid (%)
0
5
10
15
20
25
30
35
40
Under
10
10
to 19
20
to 29
30
to 39
40
to 49
50
to 59
60
to 69
70
to 79
80
to 89
90
to 99
100
or over
Numberofcompanies
2014
2013
7companies paid at least as
much in pension contributions
as they distributed in dividends.

Key assumptions
We consider below the various assumptions used to place an IAS19 value
on pension benefits. Where a company operates pension schemes in more
than one country, we have considered the assumptions used for the UK if
separately given. Where a company has disclosed a range of assumptions,
we have taken the mid-point.
Life expectancy
Under the IAS19 standard, companies are required to disclose any
“significant actuarial assumptions”, and we would generally expect
this to include mortality. 78 of 87 companies have provided sufficient
information in their 2014 accounts for us to derive basic mortality statistics
– specifically a male life expectancy at age 65 in the UK. This compares
to 74 out of 89 in 2013. Of the remaining 9, eight provided either non-UK
life expectancies, a range of life expectancies, or a narrative description of
their mortality assumptions. Coca Cola HBC was the only company that
did not disclose any information about the mortality assumption used.
The following charts show the range of life expectancies assumed under
IAS19 by FTSE 100 companies for males aged 65 on the balance sheet
date.
Life expectancy assumptions reported in 2014
UK males aged 65 on the accounting date
2013
2014
0
5
10
15
20
25
30
35
85.9 or less 86 to 86.9 87 to 87.9 88 to 88.9 89 to 89.9 90 or above
Numberofcompanies

26
The average assumed life expectancy was 88.0 years – up from 87.9 years
in the same companies’ 2013 accounts.
The average life expectancy disclosed by companies in their 2008
accounts was just 86.5 years so the average has increased by 1.5 years in
the past 6 years – or by 3 months every year.
However, last year we noted that the rate of increase in assumed life
expectancy appeared to be slowing and this trend has continued in 2014.
Although 46 companies disclosed higher life expectancy assumptions
in 2014, adding 0.4 years on average, 12 companies disclosed lower life
expectancy assumptions for some or all of their membership. For example,
Standard Life reduced its average disclosed life expectancy for a 60
year old male by 2 years, from 91 to 89 in 2014, whilst Capita reduced its
average assumed life expectancy for a 65 year old male in its main pension
scheme by 1.3 years, from 89.1 to 87.8 in 2014.
Land Securities assumed the longest life expectancy, stating in its 2014
accounts that male pensioners currently aged 60 will live on average to
age 91.1.
Research has shown that two of the main factors influencing life
expectancies are socio-economic group and income. In this respect it is
interesting to analyse the FTSE 100 companies’ assumed life expectancies
by the sector in which the company operates.
In the chart below the horizontal bars show the average life expectancy
for a male aged 65 in the UK for each sector, for which we have followed
the Industry Classification benchmark published by FTSE. The vertical lines
show the extent of the variation within each sector, which in most cases
increases the greater the number of companies within the sector.
Life expectancy assumptions reported in 2014 split by sector
UK males aged 65 on accounting date
2014
2013
80
82
84
86
88
90
92
Financials
Healthcare
OilGas
ConsumerServices
BasicMaterials
ConsumerGoods
Industrials
Utilities
Telecommunications
Ageatdeath
18 23 17 2104 17
Companies in each sector at 31 December 2014
5
88yearsThe average assumed life
expectancy for a 65 year
old man.

This chart shows that the highest average assumed life expectancies are
found in the financials and healthcare sectors, as last year. The lowest
average assumed life expectancy is found in the telecommunications
sector.
The biggest change was in the basic materials sector, where the average
assumed life expectancy increased from 87.4 to 87.9.
Future improvements in mortality
As well as setting assumptions to estimate how long current pensioners
will live on average, companies must also decide how life expectancies for
future pensioners will change as a result of improvements in mortality. The
allowance for future improvements can have a significant impact on the
IAS19 value of pension scheme liabilities, and hence deficits.
75 companies disclosed enough information in their accounts to analyse
how their allowance for future improvements in mortality has changed
compared to 2013. The chart below shows the allowance that these
companies have made for increases in life expectancy over the next
20 years.
0
5
10
15
20
25
30
35
Numberofcompanies
Additional life expectancy improvements reported in 2014
Improvements for UK male members aged 65 now versus aged 65 in 2034
Increase in life expectancy over next 20 years
Under
0.5 years
0.5 to
0.99 years
1 to
1.49 years
1.5 to
1.99 years
2 to
2.49 years
2.5 to
2.99 years
3 to
3.49 years
3.5 years
or over
2013
2014
On average, these companies assumed that UK pensioners retiring at age
65 in 20 years’ time will live for 1.8 years longer than a pensioner retiring
today. This is the same as the average increase in life expectancy assumed
in 2013.
Overall, these companies increased their average assumption for the life
expectancy of a 65 year old in 2034 by 0.2 years, from 89.6 years in their
2013 accounts to 89.8 years in 2014.
1.8yearsThe average assumed increase
in life expectancy for men
over the next 20 years.

28
Discount rates and inflation
The discount rate is used to calculate a present value of the projected
pension benefits. A lower discount rate means a higher IAS19 value of
pension liabilities and vice versa.
The typical FTSE 100 company has pension liabilities that are linked to
price inflation. A decrease in the price inflation assumption will lead to a
lower level of projected benefit payments, and hence a lower IAS19 value
being placed on those benefits, all other things being equal.
We have analysed the discount rates used by 45 companies and the RPI
inflation assumption of 40 companies with a December year-end, together
with the assumption for CPI inflation disclosed by 18 of these companies.
Similarly, we have analysed the discount rates used by 13 companies and
the RPI inflation assumption of 12 companies with a March 2015 year-end,
together with the assumption for CPI inflation disclosed by 7 of these
companies. The results are summarised in the charts below.
Discount rates
Under IAS19 the discount rate should be based on “high quality” corporate
bonds and the duration of the corporate bonds should be consistent with
the estimated duration of the pension obligations.
The yields on high quality corporate bonds, and hence the discount rates,
will fluctuate from day to day in line with market conditions.
December 2013
December 2014
March 2015
Discount rates used in December 2013, December 2014 and March 2015 (% pa)
0
5
10
15
20
Under
3.2
3.2 to
3.29
3.3 to
3.39
3.4 to
3.49
3.5 to
3.59
3.6 to
3.69
3.7 to
3.79
3.8 to
3.89
3.9 to
3.99
4 to
4.09
4.1 to
4.19
4.2 to
4.29
4.3 to
4.39
4.4 to
4.49
4.5 to
4.59
4.6 to
4.69
4.7 or
over
Numberofcompanies

The average discount rate decreased significantly over the year to
December 2014, from 4.5% pa in December 2013 to 3.6% pa in
December 2014. The average discount rate used by FTSE 100 companies
with a March 2015 year-end was even lower at 3.3% pa. The spread of
discount rates used by FTSE 100 companies with a December 2014
year-end has increased compared to December 2013, with a 0.5% spread
of rates compared to a 0.35% spread last year. Centrica disclosed the
highest discount rate for a FTSE 100 company with a December year-end
in their 2014 accounts (3.9% pa in 2014 compared to 4.6% pa in 2013).
IAS19 requires companies to disclose the duration of their pension
liabilities, allowing us to compare the discount rates used against the
duration of the scheme, as shown in the chart below.
AA rated corporate bonds
Discount rates
Discount rates by duration used at 31 December 2014
Source: Merrill Lynch
0%
1%
2%
3%
4%
5%
0 5 10 15 20 25 30
Yield/discountrate
Duration
Inflation - RPI assumptions
The chart on the following page shows long-term inflation assumptions
as measured by the Retail Prices Index (RPI). The average RPI assumption
decreased from 3.4% pa in December 2013 to 3.1% pa in December 2014.
In March 2015 this decreased again, to 3.0% pa.
3.6% paThe average discount rate
for December 2014 year-
ends, 0.9% pa lower than a
year earlier.
3.0% paThe average assumption for
future RPI inflation at the
end of March 2015.

30
0
5
10
15
20
25
30
Under 2.9 2.9 to 3.09 3.1 to 3.29 3.3 to 3.49 3.5 to 3.69 3.7 or over
Numberofcompanies
RPI inﬂation used in December 2013, December 2014 and March 2015 (% pa)
December 2013
December 2014
March 2015
For December 2014 year-ends, the highest RPI inflation assumption was
3.35% pa, adopted by Standard Life. At the other extreme RELX Group
and Unilever, who both reported at the same date, adopted an assumption
of 2.9% pa. In general, the December 2014 RPI inflation assumptions had a
similar spread to those used in 2013, but were lower.
The Bank of England publishes statistics for future price inflation implied
by gilt spot rates. These showed that long-term RPI inflation implied by
20 year gilt spot rates was around 3.3% pa at the end of December 2014.
This suggests that, in order to justify an assumption much lower than
this for future RPI inflation, companies may be allowing for a significant
“inflation risk premium”. This represents the theoretical return that
investors are willing to forgo when investing in index-linked gilts, in return
for the inflation protection that these assets provide.
In practice, it is the discount rate net of assumed future price inflation
which is the key assumption.
The chart below shows the difference between the discount rate and
the assumption for RPI inflation (the net discount rate) for companies
reporting as at 31 December 2013, 31 December 2014 and 31 March 2015.
It shows that the net discount rate has reduced since December 2013,
from an average of 1.1% pa to 0.5% pa at 31 December 2014. Notably, two
companies were using negative net discount rates at 31 March 2015. These
were British Land and Land Securities, adopting net discount rates of
-0.2% pa and -0.1% pa respectively.

0
5
10
15
20
Under
0
0 to
0.19
0.2 to
0.39
0.4 to
0.59
0.6 to
0.79
0.8 to
0.99
1 to
1.19
1.2 or
over
Numberofcompanies
Discount rates in excess of RPI inﬂation used in December 2013,
December 2014 and March 2015 (% pa)
December 2013
December 2014
March 2015
Inflation - CPI assumptions
Since 2010 the statutory minimum level of increases that pension schemes
must provide has been linked to the Consumer Prices Index (“CPI”) rather
than the RPI. Historically CPI has generally increased at a lower rate than
RPI and is expected to do so in the future due to the different ways in
which the two inflation indices are constructed.
In practice the inflation measure applying in a particular pension scheme
depends on the wording of the scheme rules and their interaction with
the relevant legislation setting out minimum increases. Many companies
have determined that some of the benefits in their pension scheme should
increase in line with CPI inflation.
As no significant market in CPI linked securities currently exists, market
practice is to derive an assumption for future CPI inflation by deducting
a margin from the assumed future level of RPI inflation. The chart below
shows the range of margins used by companies in their
December 2013, December 2014 and March 2015 year-end accounts,
where such information was available.
1.0% paThe average assumption
for the difference
between RPI and CPI

32
0
5
10
15
Under 0.8 0.8 to 0.89 0.9 to 0.99 1 to 1.09 1.1 or over
Numberofcompanies
Difference in RPI and CPI inﬂation assumptions used in December 2013, December 2014
and March 2015 (% pa)
December 2013
December 2014
March 2015
At 31 December 2014 the average margin was 1.0% pa compared to
0.9% pa at 31 December 2013. At 31 December 2014, Aviva, Persimmon,
Schroders and Rolls-Royce Holdings used a long-term CPI inflation
assumption of 1.1% pa below their RPI inflation assumption, the largest
margin at that date.
Increases in pensionable pay
For schemes that still relate benefits to pay close to retirement, the
assumed rate of growth in pensionable pay affects the disclosed IAS19
liability and the cost of benefits being earned. A lower assumption
produces a lower projected pension and hence lower pension liabilities as
well as a lower charge to operating income.
The average assumption for increases in pensionable pay (in excess of
the RPI inflation assumption) was 0.1% in 2014. In recent years a number
of companies have introduced caps on or even frozen increases in
pensionable salary and as a result disclosed a salary increase assumption
lower than RPI inflation. The average assumption has dropped from
0.5% pa in 2013 and from 1.5% pa 10 years ago.
0.1% paThe average assumption for
real increases in pensionable
pay, down from 1.5% pa 10
years ago.

Pensionable pay growth rates used in excess of RPI inﬂation (% pa)
2013
2014
0
5
10
15
20
25
30
Under
-1.5
-1.5 to
-0.76
-0.75 to
-0.01
0 to
0.74
0.75 to
1.49
1.5 to
2.24
2.25 or
over
Numberofcompanies
As the number of active members in final salary pension schemes has
reduced, the assumption for salary growth has become less significant.

34
Content
p36 Appendix 1 - FTSE 100 accounting disclosure listing
p40 Appendix 2 - FTSE 100 accounting risk measures

24 FTSE 100 companies disclosed a pension
surplus in 2014, compared to 21 companies
in 2013
Nick Bunch
Partner
LCP
Appendices

ThistableshowsthekeydisclosuresmadebythecompaniesintheFTSE100asat31December2014thatreportedIAS19figuresintheir2014accounts.Thesourceofthe
dataiseachcompany’sannualreportandaccountsfortheaccountingperiodendingin2014.Themarketvalueofassetsandsurplus/(deficit)figuresexcludepostretirement
medicalbenefitswherepossibleandrelatetotheworldwidepositionofeachcompany,notjusttheUKschemes.Figuresshownarebeforedeferredtaxandbeforeanybalance
sheetassetlimitshavebeenapplied.Allfiguresareroundedtothenearestmillionpounds.Thediscountrateandpriceinflationassumptionsrefertothosedisclosedforthe
companies’mainUKschemeswhereavailable.“ND”meansnoUKspecificfiguresweredisclosed.
2014Surplus/(deficit)
CompanyYear-
end
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
3iGroupMar8991971974.503.40Y
AberdeenAssetManagementSep192(4)(4)4.003.20Y
AggrekoDec91(7)(7)3.803.30Y
AngloAmericanDec3,601(159)(19)3.603.10Y
AshteadGroupApr84664.303.50Y
AssociatedBritishFoodsSep3,485(31)464.103.40Y
AstraZenecaDec6,778(1,870)(1,493)3.503.10Y
AvivaDec15,4742,3042,4243.703.10Y
BabcockInternationalGroupMar3,220(268)(268)4.503.30Y
BAESystems3
Dec23,675(5,387)(5,208)3.603.20Y
BarclaysDec28,874(1,329)(1,043)3.673.05Y
BarrattDevelopmentsJun330334.303.30Y
BGGroupDec1,285(165)(117)3.703.10Y
BHPBillitonJun778(48)134.103.10Y
BPDec28,141(5,507)(883)3.603.00Y
BritishAmericanTobaccoDec6,253(628)(341)3.403.00Y
BritishLandCoMar131664.403.70Y
BTGroupMar40,113(7,022)(6,953)4.253.25Y
BunzlDec366(70)(52)NDNDY
CapitaDec940(193)(193)3.753.00Y
CarnivalNov374773.853.20Y
CentricaDec6,444621113.903.00Y
Coca-ColaHBCDec267(112)(28)NDNDN
CompassGroupSep2,307(176)214.003.20Y
CRHDec1,594(541)(495)3.503.00Y
DiageoJun7,480(473)(235)4.203.30Y
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
9071701704.403.30Y
176(4)(4)4.503.40Y
78(6)(6)4.503.70Y
3,189(215)(85)4.403.40Y
78014.203.40Y
3,233(3)644.703.50Y
6,223(1,347)(1,031)4.503.50Y
12,3982393574.403.40Y
3,205(261)(261)4.402.80Y
21,374(3,540)(3,357)4.503.40Y
25,743(1,664)(1,366)4.463.42Y
295(13)(13)4.703.40Y
1,163(101)(57)4.503.40Y
1,248(40)344.503.60Y
26,083(3,486)5814.603.30Y
5,767(377)(138)4.403.40Y
120114.103.20Y
41,566(5,856)(5,784)4.203.30Y
336(45)(30)NDNDY
848(118)(118)4.503.30Y
329(4)(4)4.403.40Y
5,68340824.603.30Y
253(91)(10)NDNDN
2,149(209)(24)4.403.40Y
1,929(330)(291)4.603.30Y
7,082(536)(297)4.603.30Y
Appendix 1: FTSE 100 accounting disclosure listing
36

CompanyYear-
end
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
DirectLineInsuranceGroupDec83443.403.10Y
ExperianMar66514454.303.30Y
FresnilloDec13(9)(3)NDNDN
FriendsLifeDec1,63859593.67NDY
G4SDec2,040(319)(264)3.703.00Y
GKNDec2,627(1,711)(1,095)3.533.08Y
GlaxoSmithKlineDec16,112(1,689)(1,238)3.603.00Y
GlencoreXstrataDec2,342(686)(686)NDNDN
HammersonDec62(40)(28)3.603.10N
HSBCHoldingsDec28,7771,7731,7863.703.20Y
ImperialTobaccoGroupSep3,094(474)284.003.20Y
InterContinentalHotelsGroupDec112(71)(15)3.703.30Y
InternationalAirlinesGroupDec21,195381153.632.90Y
IntertekGroupDec120(25)(25)3.60NDY
ITVDec3,341(346)(298)3.603.03Y
JohnsonMattheyMar1,456(117)(117)4.603.40Y
KingfisherFeb2,127(100)(100)4.403.30Y
LandSecuritiesGroupMar196224.253.60Y
LegalGeneralGroup4
Dec1,910(494)(494)3.603.10Y
LloydsBankingGroupDec38,1338908903.672.95Y
LondonStockExchangeGroup5
Mar444(23)(23)4.503.40Y
LondonStockExchangeGroup5
Dec507(24)(24)3.703.10Y
MarksSpencerGroupMar6,7292002014.453.40Y
MeggittDec761(271)(254)3.603.10Y
MondiGroupDec110(148)(36)NDNDN
Morrison(Wm)SupermarketsFeb3,094(11)(11)4.503.50Y
NationalGridMar21,638(1,276)(1,028)4.303.30Y
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
66(2)(2)4.403.50Y
65423534.503.40Y
14(7)(2)NDNDN
1,410(4)(4)4.41NDY
1,660(504)(472)4.403.40Y
2,532(1,271)(763)4.353.28Y
15,225(613)(207)4.503.40Y
2,207(590)(590)NDNDN
58(33)(21)4.603.40N
24,576941064.453.60Y
2,924(621)(162)4.303.30Y
445(91)(11)4.603.60Y
19,109(3)654.553.28Y
113(13)(13)4.50NDY
2,870(445)(401)4.533.38Y
1,413(195)(195)4.503.40Y
2,087004.603.30Y
193664.303.50Y
1,646(464)(464)4.403.50Y
32,568(787)(787)4.603.30Y
274(26)(26)4.503.40Y
NANANANANANA
6,9302482494.303.40Y
688(190)(177)4.603.40Y
100(127)(32)NDNDN
2,839(20)(20)4.853.70Y
21,770(1,906)(1,640)4.303.40Y

CompanyYear-
end
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
NextJan66870804.283.38Y
OldMutualDec621107107NDNDN
PearsonDec2,8781351583.603.00Y
PersimmonDec506(1)(1)3.603.10Y
Prudential4
Dec8,0677557553.503.00Y
RBSDec34,359(2,284)(2,284)3.703.00Y
ReckittBenckiserGroupDec1,650(167)(43)3.503.30Y
RELXGroupDec4,345(632)(439)3.752.90Y
RioTintoDec9,755(1,688)(1,058)3.403.00Y
Rolls-RoyceHoldingsDec12,9349781,6643.603.20Y
RoyalDutchShellDec55,414(6,739)(3,519)NDNDN
RoyalMailMar3,8331,7361,7364.503.40Y
RSAInsuranceGroupDec7,500(98)343.703.00Y
SABMillerMar287(49)44NDNDN
SageGroup(The)Sep17(14)(14)NDNDN
Sainsbury(J)Mar6,131(737)(724)4.253.40Y
SchrodersDec9881041043.603.30Y
ScottishSouthernEnergyMar3,257(437)(437)4.303.60Y
SevernTrentMar1,824(348)(339)4.403.30Y
SmithNephewDec904(115)(85)3.703.00Y
SmithsGroupJul3,800(223)(135)4.003.30Y
SportsDirectApr50(15)(15)4.303.40Y
StandardCharteredDec1,691(234)(108)3.60NDY
StandardLifeDec4,2661,0291,1103.603.35Y
TaylorWimpeyDec2,004(182)(182)3.50NDY
TescoFeb8,124(3,193)(3,082)NDNDY
TravisPerkinsDec1,155(81)(81)3.703.10Y
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
60966744.503.38Y
5738383NDNDN
2,50951714.403.40Y
45724244.403.40Y
6,9446466464.403.30Y
28,488(2,996)(2,996)4.653.30Y
1,458(134)(23)4.403.60Y
3,981(379)(219)4.603.25Y
9,409(1,316)(710)4.403.40Y
10,280936764.403.50Y
51,732(2,183)452NDNDN
3,3438308304.803.30Y
6,566(165)(44)4.603.30Y
299(79)49NDNDN
17(13)(13)NDNDY
5,841(632)(619)4.603.45Y
84964644.503.70Y
3,118(517)(517)4.103.20Y
1,724(384)(374)4.403.20Y
817(110)(86)4.403.40Y
3,696(233)(146)4.403.40Y
47(20)(20)4.003.30Y
1,563(190)(88)4.50NDY
3,2445616324.603.70Y
1,853(182)(182)4.60NDY
7,206(2,378)(2,287)NDNDY
1,027004.703.40Y

39
Notes:
1 WehavelistedRPIasthemeasureofinflationandexcludedCPIwhereitcouldbeidentifiedintheaccounts.
2 ThiscolumnindicatescompaniesthatdisclosedsufficientinformationtocalculatetheirassumptionforlifeexpectancyforamalepensionerintheUK.
3 ThefiguresforBAESystemsexclude£1,444mofits2014deficit(£1,029min2013)whichisallocatedtoequityaccountedinvestmentsandotherparticipatingemployers.
4 LegalGeneralandPrudentialholdgroupinsurancepoliciesinrespectofsomeoftheirobligations.WehaveincludedtheIAS19valueofthesepoliciesinthefiguresstatedabove,asfollows:LegalGeneral:£723m
(2013:£646m)andPrudential:£263m(2013:£257m).
5 LondonStockExchangeGroupchangeditsaccountingyear-endfromMarchtoDecemberduring2014.Wehaveincludeddetailsofboththe31March2014and31December2014disclosuresinthetableabove,but
havebasedalloftheanalysisinthisreportontheDecemberaccounts.
6 ThemostrecentaccountsforWeirGroupcoverthe52weekperiodendingon2January2015(thepreviousaccountscoverthe53weekperiodendingon3January2014).Forthepurposesofthisreportwehave
includedthe2January2015accountswiththe31December2014year-endaccountsofotherFTSE100companies.
The2014figuresareasattheendoftheaccountingperiodsendingin2014.The2013figuresareasatthestartoftheaccountingperiod.AllfiguresshownaboveweretakenfromIAS19disclosures.Figureshavebeen
convertedtopoundssterlingwhereacompanyhasreportedfiguresinitsaccountsinadifferentcurrency.
Traditionally,somecompanieswithoverseaspensionplansdonotfundthemviaanexternalscheme,insteadbackingthepensionplanwithcompanyassets,whichmayresultinalargerdeficitbeingdisclosed.Where
disclosed,thesurplus/(deficit)attributabletofundedschemesisalsoshownabove.
Thediscountrateandinflationassumptionrefertothosedisclosedforthecompanies’mainUKscheme(s).Whereacompanyhasdisclosedarangeofassumptions,wehavetakenthemid-point.Whereacompany
operatespensionschemesinmorethanonecountry,wehaveconsideredtheassumptionsusedfortheUKifseparatelygiven.“ND”meansnoUKfiguresweredisclosed.
Wehaveexcludedfromoursurveythefollowing12companieswhohadnoevidenceofsignificantdefinedbenefitprovision:AdmiralGroup,Antofagasta,ARMHoldings,BritishSkyBroadcasting,BurberryGroup,
Easyjet,HargreavesLansdown,IntuProperties,RandgoldResources,Shire,StJames'sPlaceandTullowOil.
WehavealsoexludedDixonsCarphoneasnopost-mergeraccountswerepublishedfor2014.
ThefollowingthreecompanieshaveenteredtheFTSE100indexsince31December2014andhencearenotincludedinoursurvey:HikmaPharmaceuticals,InmarsatandMerlinEntertainments.Thefollowingthree
companieshaveexitedtheFTSE100indexsince31December2014:Aggreko,FriendsLifeandTullowOil.
CompanyYear-
end
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
TUITravelSep1,506(699)(418)3.903.30Y
UnileverDec15,895(2,309)(1,418)3.502.90Y
UnitedUtilitiesGroupMar2,377(177)(177)4.303.30Y
VodafoneGroupMar3,842(549)(483)4.203.20Y
WeirGroup(The)Dec6
742(94)(85)3.503.00Y
WhitbreadFeb1,571(534)(534)4.303.25Y
WolseleyJul1,3847564.303.30Y
WPPDec850(295)(132)3.40NDY
Market
valueof
assets
£m
Total
£m
Funded
schemes
£m
Discount
rate
%pa
Inflation1
%pa
Disclosed
mortality?2
1,322(661)(441)4.403.30Y
15,283(1,206)(337)4.503.30Y
2,44215154.603.30Y
3,723(528)(516)4.303.30Y
681(70)(63)4.403.40Y
1,480(542)(542)4.603.35Y
1,306(133)(63)4.503.40Y
726(247)(104)4.50NDY

40
These tables show the key results of analysis of the disclosures made by the companies in the
FTSE 100 as at 31 December 2014 that were reported in their 2014 accounts.
The figures relate to the worldwide position of each company (not just the UK disclosure) but
exclude healthcare and defined contribution pension arrangements where possible. The source
of the data is each company's annual report and accounts for the accounting period ending in
2014. The surplus/(deficit) figures are before allowing for deferred tax and before any balance
sheet asset limit has been applied.
Traditionally, some companies with overseas pension schemes do not fund them via an external
scheme, instead backing the pension scheme with company assets, which may result in a larger
deficit being disclosed.
The source of market capitalisation figures is the FTSE All-Share Index Series reports as at the
companies' year-ends (where available).
All figures shown here have been calculated using unrounded numbers. Therefore, some metrics
shown may differ to those calculated using the rounded figures.
Largest liabilities
Company
2014
Liabilities £m
2013
Liabilities £m
Royal Dutch Shell 62,153 53,914
BT Group 47,135 47,422
Lloyds Banking Group 37,243 33,355
RBS 36,643 31,484
BP 33,648 29,569
BAE Systems¹ 30,506 25,943
Barclays 30,203 27,407
HSBC Holdings 27,004 24,483
National Grid 22,914 23,676
International Airlines Group 21,157 19,112
Largest deficits
Company
2014
Deficit £m
2013
Deficit £m
BT Group 7,022 5,856
BP 5,507 3,486
BAE Systems2
5,387 3,540
Tesco 3,193 2,378
Unilever 2,309 1,206
RBS 2,284 2,996
AstraZeneca 1,870 1,347
GKN 1,711 1,271
GlaxoSmithKline 1,689 613
Appendix 2: FTSE 100 accounting risk measures

41
Largest liabilities compared to market capitalisation
Company Liabilities £m Market cap £m
2014
Liabilities/
Market cap %
2013
Liabilities/
Market cap %
International Airlines Group 21,157 9,897 214 234
BAE Systems1
30,506 14,929 204 184
RSA Insurance Group 7,598 4,372 174 200
BT Group 47,135 29,881 158 217
RBS 36,643 25,026 146 151
Sainsbury (J) 6,868 5,966 115 91
Aviva 13,170 14,269 92 92
Marks Spencer Group 6,529 7,360 89 107
Smiths Group 4,023 4,998 80 72
GKN 4,338 5,603 77 63
Largest deficit compared to market capitalisation
Company Deficit £m Market cap £m
2014
Deficit/
Market cap %
2013
Deficit/
Market cap %
BAE Systems2
5,387 14,929 36 25
GKN 1,711 5,603 31 21
BT Group 7,022 29,881 23 27
TUI Travel 699 4,351 16 16
Sainsbury (J) 737 5,966 12 9
Tesco 3,193 26,450 12 8
RBS 2,284 25,026 9 14
Severn Trent 348 4,340 8 9
G4S 319 4,312 7 12
BP 5,507 74,955 7 4
Highest funding level
Company Assets £m Liabilities £m
2014
Assets/
Liabilities %
2013
Assets/
Liabilities %
Royal Mail 3,833 2,097 183 133
Standard Life 4,266 3,237 132 121
3i 899 702 128 123
Old Mutual 621 514 121 117
Aviva 15,474 13,170 117 102
Next 668 597 112 112
Schroders 988 884 112 108
Prudential3
8,067 7,312 110 110
Rolls-Royce Holdings 12,934 11,956 108 101
Ashtead Group 84 78 108 101


Highest employer contributions compared to dividends paid6
Company
Contributions
£m
Dividends
£m
2014
Contributions
/Dividends %
2013
Contributions
/Dividends %
RSA Insurance Group 114 6 1,900 75
RBS 1,065 383 278 204
Lloyds Banking Group 531 314 169 3,216
Whitbread 62 62 100 48
BAE Systems5
640 656 98 100
Babcock International Group 97 101 96 90
Meggitt 42 51 82 55
TUI Travel 117 153 76 47
BT Group 553 778 71 79
GKN 85 135 63 44

Largest service cost4
Company
2014
Service cost £m
2013
Service cost £m
BP 565 663
Tesco 542 482
Royal Mail 448 412
RBS 359 373
Barclays 319 375
BAE Systems 318 332
HSBC Holdings 304 71
Lloyds Banking Group 297 356
BT Group 272 225
Largest employer contributions
Company
2014
Contributions £m
2013
Contributions £m
RBS 1,065 821
BP 760 814
BAE Systems5
640 646
BT Group 553 542
Tesco 535 666
Lloyds Banking Group 531 804
International Airlines Group 483 479
Unilever 433 504
HSBC Holdings 410 601

Largest employer contributions compared to service cost4
Company
Contributions
£m
Service cost
£m
2014
Contributions
less service
cost £m
2013
Contributions
less service
cost £m
RBS 1,065 359 706 448
Aviva 391 0 391 145
BAE Systems5
640 318 322 314
International Airlines Group 483 164 318 449
BT Group 553 272 281 317
National Grid 409 150 259 289
Sainsbury (J) 127 -124 251 78
Lloyds Banking Group 531 297 234 448
Unilever 433 209 224 324
Imperial Tobacco Group 116 -72 188 48
Highest equity allocation
Company
2014
Equity allocation %
2013
Equity allocation %
Ashtead Group 70 67
Whitbread 60 59
Wolseley 59 66
Tesco 54 56
GlaxoSmithKline 53 53
BP 53 66
Travis Perkins 52 55
Next 51 49
Barratt Developments 48 47
Royal Dutch Shell 48 45
1
The figures for BAE Systems include all liabilities of the multi-employer plans that the group participates in.
2
The figures for BAE Systems exclude £1,444m of its 2014 deficit (£1,029m in 2013) which is allocated to equity accounted investments
and other participating employers.
3
Prudential holds group insurance policies in respect of some of its obligations. We have included the value of these policies in the asset
figure stated above, which was £263m for 2014 (2013: £257m).
4
The service cost (representing the value of benefits earned over the accounting period) includes any curtailments and the value of any
past service benefits awarded to members during the year.
5
The figures for BAE Systems do not include contributions by the employer in respect of employee salary sacrifice arrangements.
6
International Airlines Group, Royal Mail and Sports Direct did not pay a dividend during their 2013 or 2014 accounting years, but contributed
£483m (2013: £503m), £407m (2013: £435m) and £3m (2013: £3m) to their pension schemes respectively.

Bob Scott
Partner
bob.scott@lcp.uk.com
+44 (0)20 7439 2266
Nick Bunch
Partner
nick.bunch@lcp.uk.com
+44 (0)20 7439 2266
UKc0815/0815
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