Retirement arrangements
We operate pension arrangements on behalf of our employees in both the UK and the US and also provide post-retirement healthcare and life insurance benefits to qualifying retirees in the US.
In the UK, the defined benefit section of the National Grid UK Pension Scheme and the National Grid section of the Electricity Supply Pension Scheme (National Grid Electricity Supply Pension Scheme) are closed to new entrants. Membership of the defined contribution section of the National Grid UK Pension Scheme is offered to all new employees in the UK.
In the US, we operate a number of pension plans, which provide both defined benefits and defined contribution benefits.
We also provide post-retirement benefits other than pensions to the majority of employees in the US. Benefits include health care and life insurance coverage to eligible retired employees. Eligibility is based on certain age and length of service requirements and in most cases retirees must contribute to the cost of their coverage.
Net pension and other post-retirement obligations
The following table summarises the pension and other post-retirement obligations recorded in the consolidated financial statements:
| Net plan asset/(liability) | UK £m | US £m | Total £m |
|---|---|---|---|
| As at 1 April 2009 | (154) | (2,657) | (2,811) |
| Exchange movements | – | 140 | 140 |
| Current service cost | (50) | (88) | (138) |
| Expected return less interest | (76) | (136) | (212) |
| Curtailments, settlements and other | (17) | (38) | (55) |
| Actuarial gains/(losses) | |||
| – on plan assets | 2,420 | 772 | 3,192 |
| – on plan liabilities | (3,038) | (885) | (3,923) |
| Employer contributions | 269 | 440 | 709 |
| As at 31 March 2010 | (646) | (2,452) | (3,098) |
| Plan assets | 14,883 | 4,253 | 19,136 |
| Plan liabilities | (15,529) | (6,705) | (22,234) |
| Net plan liability | (646) | (2,452) | (3,098) |
The amounts recorded in the balance sheet are based on accounting standards which require pension obligations to be calculated on a different basis from that used by the actuaries to determine the funding we need to make into each arrangement. The principal movements in net pension obligations during the year arose as a consequence of actuarial losses on plan liabilities principally as a consequence of using lower discount rates to calculate the present value of these obligations, partially offset by actuarial gains on plan assets.
Actuarial position
The last completed full actuarial valuation of the National Grid UK Pension Scheme was as at 31 March 2007. This concluded that the pre-tax funding deficit was £442 million in the defined benefit section on the basis of the funding assumptions. Employer cash contributions for the ongoing cost of this plan are currently being made at a rate of 29.4% of pensionable payroll.
The last completed full actuarial valuation of National Grid Electricity Supply Pension Scheme was as at 31 March 2007. This concluded that the pre-tax funding deficit was £405 million on the basis of the funding assumptions. Employer cash contributions for the ongoing cost of this plan are currently being made at a rate of 20.5% of pensionable payroll.
Contributions
In addition to ongoing employer contributions, we have agreed to make additional deficit contributions to certain of the above plans as follows:
- National Grid UK Pension Scheme: the Company made deficit contributions of £59 million during 2009/10 which ensured that the deficit reported at the 2007 valuation was paid in full; and
- National Grid Electricity Supply Pension Scheme: the Company made deficit contributions of £90 million during 2009/10 and anticipates no further payments in the year to 31 March 2011, in line with the recovery plan.
The next valuations of these schemes are due as at 31 March 2010.
In accordance with our funding policy for US pension and other post-retirement benefit plans, we expect to contribute approximately £414 million to these plans during 2010/11.
Plan assets
Our plans are trustee administered and the trustees are responsible for setting the investment strategy and monitoring investment performance, consulting with us where appropriate.