IBRC annual report for 2011 - Irish Bank Resolution Corporation ...

Notes to the financial statements continued11. Retirement benefits continuedSensitivity analysisSensitivity analysis for each of the principal assumptions used to measure the schemes' liabilities at 31 December 2011 is asfollows:Impact on scheme liabilitiesincrease by increase byChange in assumption % €mDiscount rate Decrease 0.5% 8.8% 7Rate of increase in salaries Increase 0.5% 0.5% -Inflation rate Increase 0.5% 1.9% 1Life expectancy Increase by 1 year 1.9% 1AssetsThe expected long term rate of return on assets of 3.0% (2010: 5.0%) at the year end is estimated based on the current level ofexpected returns on least risk investments (primarily government bonds), the historical level of the risk premium associated withthe other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. Theexpected return for each asset class is then weighted based on the actual allocation to develop the long-term rate of return onassets assumption for the portfolio. The rate for the current year of 3.0% includes an adjustment of 0.6% to reflect the impactof the levy introduced by the Government on pension scheme assets for the four years from 2011 to 2014. The unexpected losson assets arising during 2011 from the application of the 0.6% levy is treated as an actuarial loss and is recognised in thestatement of comprehensive income.The market value of assets in the schemes and the expected long term rates of return were:% of Market % of MarketExpected scheme value Expected scheme valuereturn assets of assets return assets of assets2011 2011 2011 2010 2010 2010% % €m % % €mEquities 5.75 23 19 7.2 34 32Bonds 2.85 72 60 4.0 53 50Property 4.75 3 2 6.2 3 3Hedge funds 5.75 1 1 6.2 1 1Cash 2.00 1 1 2.0 9 8Total market value of schemes' assets83 94Actuarial value of liabilities of funded schemes (75) (93)Retirement benefit assets 8 1At 31 December 2011 the pension schemes held no ordinary shares in the parent Bank (2010: none).64