Setting new standards - Friends Life

FINANCIAL STATEMENTS
IFRS FINANCIAL STATEMENTS
EEV SUPPLEMENTARY INFORMATION
Notes to the consolidated accounts continued
10. Staff pension schemes continued
(ii) Mortality assumptions
Mortality assumptions are based on the medium cohort basis, projected forward, to take account of future improvements in mortality, according
to each individual’s year of birth.
The mortality assumptions provide the following life expectancies of members retiring at the age of 60:
Life expectancy 2006 2005
Basis – future pensioners PM/FA92BMC* PM/FA92BMC*
Basis – current pensioners PM/FA92BMC* PM/FA92BMC*
Expected age at death of future male pensioner 88 88
Expected age at death of future female pensioner 90 90
Expected age at death of current male pensioner 87 87
Expected age at death of current female pensioner 90 90
*Projected according to individual’s year of birth
The present value of providing an annuity from the age of 60, based on the above life expectancies, for every one pound of pension
accumulated, is as follows:
Cost of annuities 2006 2005
£ £
Male annuity 24.68 22.72
Female annuity 23.81 22.29
These rates assume a monthly payments model with a discount rate of 5.02% (2005: 4.75%). The rates also assume two-thirds of the
members benefit will be paid to the spouse, a 5-year guarantee is provided and pensions in excess of the Guaranteed Minimum Pension will
increase by 3.02% (2005: 2.70%) per annum.
2006 2005
% of total % of total
membership membership
Active members 24 23
Deferred members 56 57
Pensioners 20 20
100 100
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Assumption Change in assumption Impact on scheme liabilities
Inflation Increase/decrease by 0.5% Increase/decrease by 2.3%
Salaries Increase/decrease by 0.5% Increase/decrease by 1.7%
Pensions Increase/decrease by 0.5% Increase/decrease by 5.6%
Discount rate Increase/decrease by 0.5% Decrease/increase by 10.2%
Rate of mortality Increase/decrease by 1 year Increase/decrease by 2.5%
98 Friends Provident Annual Report & Accounts 2006