bank-r-and-a

Recommendations

Info

Overview Strategic report Corporate governance Risk management Financial statements Other information Notes to the Bank financial statements continued For the year ended 31 December 2013 All amounts are stated in £m unless otherwise indicated 36. Pensions continued As a multi-employer pension scheme, Pace exposes the participating businesses to actuarial risks associated with the current and former employees of the other Co-operative Group companies. The proportion of Pace liabilities accrued by members whilst employees of the Bank are believed to represent a minority of total Pace liabilities. The Bank could however be liable for funding a greater proportion of Pace liabilities. There are for example liabilities in Pace relating to benefits accrued by members whilst employed by CFSMS and working in the Bank’s business. On 23 January 2014, following the legal separation of the Bank from the wider Co-operative Group, employment contracts for those employees who spend the majority of their time working on behalf of the Bank were transferred from CFSMS to the Bank. This will increase the number of Bank employees participating in the Pace scheme in 2014. There may also be ‘orphan liabilities’ in Pace that do not relate to any current employer in Pace. The extent to which the Bank could be liable for funding a greater proportion of Pace liabilities will depend, inter alia, on what position is reached as to the Pace liabilities properly attributable to the Bank following discussions with The Co-operative Group. Such discussions are not yet substantively underway. There is therefore currently insufficient information available to consistently and reliably identify the Bank’s share of Pace liabilities and employer costs. For the above reasons the pension costs in respect of Pace are accounted for on a defined contribution basis in accordance with IAS 19 (revised 2011). Pension costs are recognised as an expense in the Bank income statement on a defined contribution basis as explained below. The Pace scheme is not sectionalised and operates on a ‘last man standing’ basis. In the event that other participating employers become insolvent and the full statutory debt is not recovered on insolvency, the Bank would become liable for the remaining liabilities. There is no agreed allocation of a deficit or surplus on (i) wind up of the Plan, or (ii) the entity’s withdrawal from the Plan. The key aspects of Pace are illustrated below. Scheme information Risks arising in Pace are identified at The Co-operative Group level, with the impact of any changes to contribution assessed under the Bank’s risk management framework. The Bank is therefore exposed to potential future increases in required contributions and capital held for pension risk. The Pace Trustee, in consultation with The Co-operative Group, is responsible for the risk management arrangements for Pace agreeing suitable contribution rates, investment strategy and for taking appropriate professional advice as required. Contribution payments On an accounting basis the Pace scheme is in a surplus of £355.9m at 31 December 2013. Under the current arrangements the Bank does not have an unconditional right of refund of scheme assets on winding up or any right to reduction of contributions as a result of this surplus. Based on advice from a qualified actuary, the contributions in respect of future service in the defined benefit section, payable by the participating entities were 16.7% of pensionable salaries, up to 6 October 2012. Thereafter, this was reduced to 16.0% of pensionable salaries to reflect an increase in member contributions. The next triennial valuation is currently in progress, the results of which are expected in 2014. The Bank also pays contributions in respect of the employed members of the defined contribution sections of the scheme of either 2% or 8% of pensionable salaries. On a funding basis the scheme is in a deficit position. The level of funding for the Pace scheme is agreed between The Co-operative Group and the Pace Trustee. Following the last actuarial triennial valuation in 2010, The Co-operative Group agreed a recovery plan with the Trustee of the scheme to contribute £20m per annum over 8 years to repay the £248m deficit agreed as at 5 April 2010. Although there is no formal allocation of defined benefit liabilities between the participating employers of the scheme, the Bank has paid £8m of the total deficit recovery contributions in 2013. However the current recovery plan ending in 2019 between The Co-operative Group and the Pace scheme trustees may be insufficient to repay the latest valuation of the deficit. Following completion of the 2013 valuation, a new schedule of contributions and recovery plan will be agreed between The Co-operative Group and the Pace scheme Trustee following advice from the Independent Scheme Actuary. Neither The Co-operative Group, the Trustee, or the Bank is under an obligation to agree any separation of the Pace scheme that would result in material payments to the scheme, however The Co-operative Group has undertaken to agree with the Bank its proportion of employer contributions in Pace and, if not agreed, the matter will be referred to an independent third party. Accordingly, there is a wide range of outcomes regarding the duration and contribution requirements of a new schedule of contributions and recovery plan which make the overall contribution uncertain. To the best of the Directors’ knowledge and belief, having made reasonable enquiries, there is no contractual agreement determining how the funding deficit recovery contributions are funded by the participants, the Bank has not recognised a liability in respect of any part of the existing deficit funding. A formal triennial valuation of Pace as at 5 April 2013 is underway but has not yet been completed. When completed it may reveal a significant funding deficit and The Co-operative Group and the Bank may discuss the Bank’s contribution towards funding this. There is therefore a risk that in future periods the Bank will recognise significant liabilities in respect of the scheme in its accounts. The Co-operative Bank plc Annual report and accounts 2013 189
Overview Strategic report Corporate governance Risk management Financial statements Other information Notes to the Bank financial statements continued For the year ended 31 December 2013 All amounts are stated in £m unless otherwise indicated 36. Pensions continued The key financial aspects of Pace are illustrated below. These amounts are not recognised within these financial statements and are therefore disclosed below: Key assumptions of the Pace pension scheme The key aspects of the Pace scheme are as follows: 2013 2012 The principal assumptions used to determine the liabilities of the Pace scheme are: Discount rate 4.45% 4.60% Rate of increase in salaries 3.60% 4.80% Future pension increases where capped at 5.0% per annum 3.60% 3.30% Future pension increases where capped at 2.5% per annum 2.50% 2.50% Assumptions used to determine net pension cost for the Pace scheme are: Discount rate 4.60% 4.60% Rate of increase in salaries 4.80% 4.80% The average life expectancy (in years) for mortality tables used to determine scheme liabilities for the Pace scheme at the 2013 year end is: Male Female Life expectancy: Member currently aged 65 (current life expectancy) 22.4 24.1 Member currently aged 45 (life expectancy at age 65) 24.3 26.0 The balance sheet amounts attributable to the entire scheme are as follows: 2013 2012 Fair value of plan assets 7,486.5 6,919.4 Present value of funded obligations (7,125.8) (6,532.1) 360.7 387.3 Present value of unfunded obligations (4.8) (4.5) 355.9 382.8 The asset allocations at the year end were as follows: 2013 2012 Equities 2,398.8 2,145.0 Liability driven investments 3,382.6 3,390.5 Alternative growth 994.2 968.7 Property 308.6 276.8 Other 402.3 138.4 The table below shows the value of the assets in each category which have a quoted market price: 2013 2012 Equities 2,395.8 2,135.7 Liability driven investments 2,654.9 2,620.0 Other 338.2 104.5 190 The Co-operative Bank plc Annual report and accounts 2013
Page 1 and 2:
The Co-operative Bank plc Annual re
Page 3 and 4:
Overview Strategic report Corporate
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140: Overview Strategic report Corporate
Page 189: Overview Strategic report Corporate
Page 241 and 242:
Page 243 and 244:
Page 245 and 246:
Page 247 and 248:
Page 249 and 250:
Page 251 and 252:
Page 253 and 254:
Page 255 and 256:
Page 257 and 258:
Page 259 and 260:
Page 261 and 262:
Page 263 and 264:
Page 265 and 266:
Page 267 and 268:
Page 269 and 270:
Page 271 and 272:
Page 273 and 274:
Page 275 and 276:
Page 277:
The Co-operative Bank plc Registere
show all

bank-r-and-a

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?