Setting new standards - Friends Life

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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, using a ‘typical’ year of birth of 1965 for all future pensioners and 1935 for all current pensioners, rather than on an individual basis. The mortality assumptions provide the following life expectancies of members retiring at the age of 60: Life expectancy 2006 2005 Basis – future pensioners PM/FA92B1965MC-1 PM/FA92B1965MC-1 Basis – current pensioners PM/FA92B1935MC-1 PM/FA92B1935MC-1 Expected age at death of future male pensioner 88 88 Expected age at death of future female pensioner 91 91 Expected age at death of current male pensioner 86 86 Expected age at death of current female pensioner 89 89 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 24.50 24.70 Female annuity 25.00 25.20 These rates assume a monthly payments model with a discount rate of 5.00% (2005: 4.70%) based on the iBoxx over 15 year AA corporate bond index of 5.12% (2005: 4.73%). 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 GMP will increase by 3.00% (2005: 2.75%) per annum. 2006 2005 % of total % of total membership membership Active members 21 22 Deferred members 69 68 Pensioners 10 10 100 100 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 0.1% Increase/decrease by 1.9% Salaries Increase/decrease by 0.1% Increase/decrease by 0.4% Pensions Increase/decrease by 0.1% Increase/decrease by 1.0% Discount rate Increase/decrease by 0.1% Decrease/increase by 2.3% Rate & mortality Increase/decrease by 1 year Increase/decrease by 2.6% 104 Friends Provident Annual Report & Accounts 2006
PARENT COMPANY ACCOUNTS ABBREVIATIONS AND DEFINITIONS Notes to the consolidated accounts continued 10. Staff pension schemes continued (iii) Changes in the present value of obligations of defined benefit schemes 2006 2005 £m £m Present value of obligations at 1 January 164 114 Interest cost 8 6 Current service cost 4 3 Contributions by plan participants - - Actuarial (gains)/losses (4) 42 Benefits paid (3) (2) Past service cost - 1 Transfer in respect of The Netherlands scheme 11 - Present value of obligations at 31 December 180 164 (iv) Analysis of defined benefit obligations 2006 2005 £m £m Wholly unfunded plans 2 2 Wholly or partly funded plans 178 162 180 164 The profile of the obligations is analysed as follows: 2006 2005 £m £m Active members 57 51 Deferred members 83 76 Pensioners 40 37 180 164 (v) Changes in present value of defined benefit plan assets 2006 2005 £m £m Fair value of plan assets at 1 January 116 96 Expected return on plan assets 8 6 Actuarial gains 2 11 Employer contributions 4 5 Benefits paid (3) (2) Transfer in respect of The Netherlands scheme 7 - Fair value of plan assets at 31 December 134 116 Friends Provident Annual Report & Accounts 2006 105
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Setting new standards Friends Provi
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ANNUAL REVIEW CORPORATE GOVERNANCE
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Group financial highlights Group
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INTERNATIONAL LIFE & PENSIONS ASSET
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