110 LV= Annual Report 2012
Notes to the financial statements continued
31 December 2012
39. Pension benefit asset / (obligation)
Accounting for pension benefits under IAS19
For defined benefit schemes, the net surplus or deficit is calculated annually with the assets measured at the fair value at the Statement
of Financial Position date and the liabilities discounted at the rate of return available on high quality corporate bonds. The net surplus,
to the extent recoverable, or deficit is recognised as a pension benefit asset or liability in the Statement of Financial Position.
The pension cost for the schemes is analysed between current service cost, past service cost and net return on pension scheme assets.
Current service cost is the actuarially calculated present value of the benefits earned by the active employees in each period. Past
service costs, relating to employee service in prior periods arising in the current period as a result of the introduction of, or improvement
to, retirement benefits, are recognised in Other operating and administrative expenses on a straight-line basis over the period in which
the increases in benefits vest or are earned.
All movements other than actuarial gains and losses in respect of the pension benefit obligation are recognised in other operating and
administrative expenses in the Statement of Comprehensive Income. Actuarial gains and losses are recognised in the Statement of
Comprehensive Income after profit/(loss) before tax and are disclosed net of tax.
Contributions to defined contribution schemes are recognised as employee benefit expenses when they are due.
Significant accounting estimates and judgements
The valuations of the pension benefit obligations for the two defined benefit schemes are determined using actuarial valuations. These
involve making assumptions about discount rates, expected future returns on assets, future salary increases, longevity and future
pension increases. Due to the long-term nature of these obligations, the estimates are subject to significant uncertainty.
Details of the principal assumptions used for each of the defined benefit schemes are disclosed within the valuations of the individual
schemes disclosed in sections (ii) and (iii) below.
i) Summary
Pension benefit asset/(obligation)
2012 2011
LV Scheme Ockham Total LV Scheme Ockham Total
£m £m £m £m £m £m
Asset - - - 108.1 - 108.1
Obligation (7.7) (2.5) (10.2) - (1.2) (1.2)
(7.7) (2.5) (10.2) 108.1 (1.2) 106.9
Actuarial net (loss)/gain
2012 2011
LV Scheme Ockham Total LV Scheme Ockham Total
£m £m £m £m £m £m
Actuarial net (loss) / gain (138.0) (7.5) (145.5) 66.5 3.9 70.4
Income tax credit/(expense) - - - - (0.7) (0.7)
Amount charged to total comprehensive income (138.0) (7.5) (145.5) 66.5 3.2 69.7
Cumulative actuarial gain/(loss) recognised in the
Statement of Comprehensive Income 44.0 (0.7) 43.3 182.0 6.8 188.8