GSK Annual Report 2002

33 Employee costs continued
Notes to the financial statements GlaxoSmithKline 117
The UK defined benefit schemes also have defined contribution sections with account balances totalling £281 million at
31st December 2002 (2001 – £263 million). The defined benefit sections of the UK schemes have been closed to new members, and
under the projected unit method of valuing the pension scheme liabilities the current service cost will increase as the members of the
schemes approach retirement. The deficits under FRS 17 reflect the different bases for valuing assets and liabilities compared with SSAP 24,
including the immediate impact of the fair values of assets at 31st December 2002.
The Group also operates a number of unfunded post-retirement healthcare schemes, the principal one of which is in the USA. The liability
under FRS 17 for the US scheme has been assessed using the same assumptions as for the US pension scheme, together with the
assumption for future medical inflation of 11 per cent, reducing by one per cent per year to five per cent. On this basis the liability for the
US scheme has been assessed at £766 million (2001 – £787 million), which reduced to £475 million (2001 – £488 million) after taking
account of deferred tax.
If the defined benefit pension and post-retirement benefit schemes had been accounted for under FRS 17, the following amounts would
have been recorded in the profit and loss account and statement of total recognised gains and losses for the year ended
31st December 2002.
Post-retirement
Pensions benefits
UK USA Rest of World Group Group
£m £m £m £m £m
Amounts charged to operating profit
Current service cost (118) (74) (32) (224) (24)
Past service cost (28) (34) – (62) –
Curtailments/settlements – – (1) (1) –
(146) (108) (33) (287) (24)
Amounts credited/(charged) to net interest
Expected return on pension scheme assets 293 129 14 436
Interest on scheme liabilities (235) (129) (22) (386) (53)
58 – (8) 50 (53)
Amounts recorded in statement of total
recognised gains and losses
Actual return less expected return on pension scheme assets (1,024) (293) (56) (1,373)
Experience gains/(losses) arising on scheme liabilities 34 (3) 2 33 95
Changes in assumptions relating to present
value of scheme liabilities (15) (57) 10 (62) (124)
(1,005) (353) (44) (1,402) (29)
Movements in deficits during the year
Deficits in schemes at 1st January 2002 (255) (245) (214) (714) (854)
Exchange adjustments – 37 (9) 28 85
Charged to operating profit (146) (108) (33) (287) (24)
Employer contributions 154 249 61 464 41
Other finance income/(expense) 58 – (8) 50 (53)
Actuarial loss recognised in statement of total
recognised gains and losses (1,005) (353) (44) (1,402) (29)
Deficits in schemes at 31st December 2002 (1,194) (420) (247) (1,861) (834)
History of experience gains and losses
Difference between the expected and actual
return on scheme assets (£m) (1,024) (293) (56) (1,373)
Percentage of scheme assets at 31st December 2002 35% 22% 17% 30%
Experience gains/(losses) of scheme liabilities (£m) 34 (3) 2 33 95
Percentage of present value of scheme liabilities
at 31st December 2002 1% – – 1% 11%
Total amount recognised in statement of total
recognised gains and losses (£m) (1,005) (353) (44) (1,402) (29)
Percentage of present value of scheme
liabilities at 31st December 2002 24% 20% 8% 22% 3%