Notes to the consolidated financial statements – analysis of items in the primary statements
5. Pensions and other post-retirement benefits
Substantially all National Grid’s employees are members of either defined benefit or defined contribution pension plans.
In the UK the principal schemes are the National Grid UK Pension Scheme and the National Grid Electricity Group of the Electricity Supply Pension Scheme. In the US we have a number of defined benefit and defined contribution pension plans and we also provide health care and life insurance benefits to eligible retired US employees. For further details regarding the nature and terms of each scheme/plan and the actuarial assumptions used to value the associated assets and pension or other post-retirement benefit obligations, refer to note 31.
The amounts recognised in the income statement with respect to pensions and other post-retirement benefits are as follows:
| Pensions | US other post-retirement benefits | |||||
|---|---|---|---|---|---|---|
| 2008 £m |
2007 £m |
2006 £m |
2008 £m |
2007 £m |
2006 £m |
|
| Defined contribution scheme costs | 5 | 3 | 2 | – | – | – |
| Defined benefit scheme costs | ||||||
| Current service cost | 125 | 113 | 112 | 21 | 15 | 16 |
| Past service cost | 5 | – | – | 5 | 7 | 6 |
| Curtailment gain on redundancies | (16) | (10) | (24) | (4) | – | – |
| Settlements on redundancies | 16 | – | – | – | – | – |
| Special termination benefits on redundancies | 80 | 23 | 45 | 1 | – | – |
| Curtailment cost – augmentations | 3 | 3 | 5 | – | – | – |
| Total in payroll costs – continuing | 218 | 132 | 140 | 23 | 22 | 22 |
| Curtailment gain on sale of subsidiary undertaking | (12) | – | – | – | – | – |
| Interest cost | 912 | 806 | 826 | 89 | 63 | 63 |
| Expected return on plan assets | (1,014) | (885) | (860) | (50) | (41) | (41) |
| Total in finance costs – continuing | (102) | (79) | (34) | 39 | 22 | 22 |
| Current service costs | 2 | 2 | 7 | 1 | – | – |
| Interest cost | – | 2 | 2 | – | – | – |
| Expected return on plan assets | – | (2) | (2) | – | – | – |
| Curtailment/settlement gain on sale of distribution networks | – | – | (168) | – | – | – |
| Total in discontinued operations | 2 | 2 | (161) | 1 | – | – |
The amounts recognised in the statement of recognised income and expense are as follows:
| Pensions | US other post-retirement benefits | |||||
|---|---|---|---|---|---|---|
| 2008 £m |
2007 £m |
2006 £m |
2008 £m |
2007 £m |
2006 £m |
|
| Actuarial net gain/(loss) during the year | 497 | 357 | 197 | (65) | 8 | (16) |
| Exchange differences | 3 | 40 | (30) | 3 | 75 | (51) |
| Total recognised for the year | 500 | 397 | 167 | (62) | 83 | (67) |
| Cumulative actuarial gain/(loss) | 1,322 | 825 | 468 | (91) | (26) | (34) |
The amounts recognised in the balance sheet with respect to pensions and other post-retirement benefits are as follows:
| Pensions | US other post-retirement benefits | |||||
|---|---|---|---|---|---|---|
| 2008 £m |
2007 £m |
2006 £m |
2008 £m |
2007 £m |
2006 £m |
|
| Present value of funded obligations | (16,233) | (16,044) | (16,520) | (1,784) | (1,126) | (1,223) |
| Fair value of plan assets | 16,536 | 15,468 | 15,341 | 737 | 531 | 568 |
| 303 | (576) | (1,179) | (1,047) | (595) | (655) | |
| Present value of unfunded obligations | (158) | (83) | (96) | – | – | – |
| Other post-employment liabilities | – | – | – | (34) | (33) | (34) |
| Unrecognised past service cost | – | – | – | 36 | 42 | 49 |
| Net asset/(liability) in the balance sheet | 145 | (659) | (1,275) | (1,045) | (586) | (640) |
| Liabilities | (701) | (696) | (1,275) | (1,045) | (586) | (640) |
| Assets | 846 | 37 | – | – | – | – |
| Net asset/(liability) | 145 | (659) | (1,275) | (1,045) | (586) | (640) |
| Changes in the present value of the defined benefit obligation | ||||||
| Opening defined benefit obligation (including unfunded obligations) | (16,127) | (16,616) | (15,769) | (1,126) | (1,223) | (1,068) |
| Current service cost | (127) | (115) | (119) | (22) | (15) | (16) |
| Interest cost | (912) | (808) | (828) | (89) | (63) | (63) |
| Actuarial gains/(losses) | 1,335 | 450 | (1,300) | 8 | (4) | (40) |
| Curtailment gain on redundancies | 16 | 10 | 24 | 4 | – | – |
| Curtailment gain on sale of subsidiary undertaking | 12 | – | – | – | – | – |
| Curtailment gain/settlement on sale of distribution networks | – | – | 757 | – | – | – |
| Net transfers and disposals | 8 | (1) | 15 | – | – | – |
| Gains on settlements | – | – | 20 | – | – | – |
| Special termination benefits | (80) | (23) | (45) | (1) | – | – |
| Curtailment cost – augmentations | (3) | (3) | (5) | – | – | – |
| Acquisition of subsidiary undertakings | (1,362) | (89) | – | (639) | (19) | – |
| Plan amendments | (5) | – | – | – | (6) | – |
| Employee contributions | (15) | (14) | (14) | – | – | – |
| Benefits paid (including unfunded obligations) | 875 | 845 | 775 | 78 | 62 | 59 |
| Transferred to liabilities of businesses held for sale | – | 48 | – | – | – | – |
| Exchange adjustments | (6) | 189 | (127) | 3 | 142 | (95) |
| Closing defined benefit obligation (including unfunded obligations) | (16,391) | (16,127) | (16,616) | (1,784) | (1,126) | (1,223) |
| Changes in the fair value of plan assets | ||||||
| Opening fair value of plan assets | 15,468 | 15,341 | 14,077 | 531 | 568 | 488 |
| Expected return on plan assets | 1,014 | 887 | 862 | 50 | 41 | 41 |
| Actuarial (losses)/gains | (838) | (93) | 1,497 | (73) | 12 | 24 |
| Assets distributed on settlements and transfers | (16) | – | (623) | – | – | – |
| Transfers (out)/in | (8) | 1 | – | – | – | – |
| Employer contributions | 465 | 276 | 191 | 46 | 28 | 30 |
| Employee contributions | 15 | 14 | 14 | – | – | – |
| Acquisition of subsidiary undertakings | 1,302 | 82 | – | 259 | 7 | – |
| Benefits paid | (875) | (845) | (774) | (76) | (58) | (59) |
| Transferred to liabilities of businesses held for sale | – | (46) | – | – | – | – |
| Exchange adjustments | 9 | (149) | 97 | – | (67) | 44 |
| Closing fair value of plan assets | 16,536 | 15,468 | 15,341 | 737 | 531 | 568 |
| Actual return on plan assets | 176 | 794 | 2,359 | (23) | 53 | 65 |
| Expected contributions to defined benefit plans in the following year | 581 | 307 | 153 | 128 | 27 | 50 |