G4S Annual Report and Accounts 2011

Overview Strategic review Performance
Notes to the consolidated financial statements continued
34 Retirement benefit obligations continued
Defined benefit arrangements
The group operates a number of defined benefit retirement arrangements where the benefits are based on employees’ length of service. In most cases
these are calculated on the basis of final pensionable pay, other than for the smallest of the three sections in the UK and one scheme in the Netherlands
where they are based on career average pay. Liabilities under these arrangements are stated at the discounted value of benefits accrued to date, based
upon actuarial advice.
Under unfunded arrangements, the group does not hold the related assets separate from the group. The amount charged to the income statement in
respect of these arrangements in 2011 totalled £3m (2010: £3m). Under funded arrangements, the assets of defined benefit schemes are held in separate
trustee-administered funds. The pension costs are assessed on the advice of qualified independent actuaries using the projected unit credit method. The
group operates several funded defined retirement benefit schemes. Whilst the group’s primary scheme is in the UK, it also operates other material
schemes, primarily in the Netherlands and Canada.
The carrying values of retirement benefit obligations at the balance sheet date are presented below:
UK 285 256
Rest of World 10 9
Net liability on material funded defined retirement benefit schemes 295 265
Unfunded and other funded defined retirement benefit obligations 49 41
344 306
2011
£m
2010
£m
The defined benefit scheme in the UK accounts for 97% of the net balance sheet liability on material funded defined retirement benefit schemes. It
comprises three sections: the pension scheme demerged from the former Group 4 Falck A/S with total membership of approximately 8,000; the Securicor
scheme, responsibility for which the group assumed on 20 July 2004 with the acquisition of Securicor plc, with total membership of approximately 20,000;
and the GSL scheme, responsibility for which the group assumed on 12 May 2008 with the acquisition of GSL, with total membership of approximately
2,000. The UK scheme was formally actuarially assessed at 5 April 2009. Pension obligations stated in the statement of financial position take account of
future earnings increases, have been updated to 31 December 2011 and use the valuation methodologies specified in IAS 19 Employee Benefits.
During the year the group closed the UK scheme to future accrual. Existing members retained their link to final salary where appropriate and their benefits
accrued to-date. Members have been offered the opportunity to move to a new defined contribution scheme for future pension benefits. There has been
no curtailment gain or loss.
In 2010, the UK government announced that the minimum rates at which pensions will increase will change from using RPI to CPI. This change resulted in a
one-off reduction in the liabilities, mainly associated with UK deferred pensioners, by £32m. This was accounted for in 2010 as a credit to reserves in line
with UITF48 Accounting implications of the replacement of the Retail Prices Index with the Consumer Prices Index for Retirement Benefits.
As at the latest actuarial valuation, the participants of the UK pension scheme sections can be analysed as follows:
At 5 April 2009
Group 4 Falck
Section
GSL
Section
Securicor
Section
Total
Active participants
– Number 618 1,311 1,409 3,338
– Average age 53.2 50.8 51.9 51.7
Deferred participants
– Number 4,559 537 10,352 15,448
– Average age 51.3 48.4 50.8 50.9
Pensioner participants
– Number 2,607 208 7,878 10,693
– Average age 68.2 61.1 69.9 69.3
110
G4S plc
Annual Report and Accounts 2011