Defined benefit scheme - SSAP 24 basis
Contributions to the Group's funded defined benefit pension scheme are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the Group. The contributions are determined by a qualified actuary, Watson Wyatt Partners, on the basis of valuations, which are generally carried out every three years, using the attained age method. The pensions costs for accounting purposes have been calculated using the same assumptions as those adopted for the final valuation. The most recent valuation was at 1 July 2001. The assumptions used for accounting purposes which have the most significant effect on the results of the valuation are those relating to the rate of return on investments and the rates of increases in salaries and pensions. When assessing the scheme's liabilities, it was assumed that the investment return on existing assets would exceed salary increases by 2% per annum and that present and future pensions would increase at the rate of 3% per annum (2.5% per annum for pensions earned in respect of service after 5 April 1997). The long-term rate of return on future contributions was assumed to be 6.6% per annum. The most recent actuarial valuation showed that the market value of the scheme's assets was £55.5m and that those assets represented 86% of the benefits that had accrued to members, after allowing for expected future increases in earnings.

The pension charge for the year of £2.3m (2001: £2.4m) includes £1.0m (2001: £1.0m) in respect of the amortisation of a valuation deficit that is being recognised over 13 years, the average remaining service lives of employees. Since the 1 July 2001 actuarial valuation, augmentation payments of £2.5m have been paid to the pension scheme. Ongoing employer contributions have been increased in line with our actuary's recommendations in order to eliminate the deficit by 6 April 2007 and will be paid at a rate of 44.2% (2001: 26.9%) of pensionable salaries for the year to 31 December 2003. The total employer's contributions (including death in service premiums) for the year were £4.1m. There is a prepayment of £2.4m (2001: £0.6m) in the balance sheet representing the difference between the amount charged in the profit and loss account and the amount paid into the pension scheme.

Defined benefit scheme - FRS 17 basis
The actuarial valuation used in assessing the FRS 17 disclosures was carried out as at 1 July 2001, and has been updated by Watson Wyatt Partners to take account of the requirements of FRS 17 and to assess the assets and liabilities of the scheme as at 31 December 2002. Scheme assets are stated at their market value on 31 December 2002. The liabilities of the scheme under FRS 17 were calculated using the Projected Unit method with the following financial assumptions:

		2002	2001
Rate of increase in salaries		3.80%	4.00%
Rate of increase in pensions in payment *		2.30%	2.50%
Discount rate		5.80%	5.75%
Inflation assumption		2.30%	2.50%

*on the excess over the Guaranteed Minimum Pensions. Pensions which are guaranteed to increase at a rate of 3% per annum have been assumed to increase at 3%.

The assets in the scheme and the expected rates of return were:

		Long-term rate of return expected at 31 December 2002	Value at 31 December 2002 £m	Long-term rate of return expected at 31 December 2001	Value at 31 December 2001 £m
Equities		8.50%	35.0	7.75%	41.3
Bonds		5.00%	6.7	5.25%	7.8
Property		6.80%	1.0	6.50%	1.2
Other		3.80%	2.8	4.50%	2.4
		7.65%	45.5	7.20%	52.7

The following amounts at 31 December 2002 were measured in accordance with the requirements of FRS 17:

		2002	2001
		£m	£m
Total market value of assets		45.5	52.7
Present value of scheme liabilities		(69.4)	(69.9)
Deficit in the scheme		(23.9)	(17.2)
Related deferred tax asset		7.2	5.2
Net pension liability		(16.7)	(12.0)

The amount of the net pension liability would have a consequential effect on reserves.

The amounts charged to the profit and loss account under FRS 17 would be as follows:

		2002
		£m
Current service cost		1.8
Past service cost		-
Charge to operating profit		1.8
Expected return on pension scheme assets		(3.8)
Interest on pension scheme liabilities		3.9
Charge to financing cost		0.1
Charge to profit and loss account		1.9

The scheme is closed to new entrants. Under the projected unit method, the current service cost will increase as members approach retirement.

Analysis of amounts recognised in statement of total recognised gains and losses under FRS 17 would be as follows:

		2002
		£m
Actual return less expected return on pension scheme assets		(13.5)
Experience gains and losses arising on scheme liabilities		2.6
Changes in assumptions underlying the present value of scheme liabilities		1.7
Total actuarial loss recognised		(9.2)

The movement in the scheme’s deficit during the year is made up as follows:

		£m
Deficit in scheme at 1 January 2002		(17.2)
Current service cost		(1.8)
Contributions		4.4
Other finance income		(0.1)
Actuarial loss		(9.2)
Deficit in scheme at 31 December 2002		(23.9)

The experience gains and losses for the year ended 31 December 2002 were as follows:

Difference between the expected and actual return on scheme assets:
Amount (£m)		(13.5)
Percentage of scheme assets		30%
Experience gains and losses on scheme liabilities:
Amount (£m)		2.6
Percentage of the present value of scheme liabilities		4%
Total amount recognised in the statement of total recognised gains and losses:
Amount (£m)		(9.2)
Percentage of the present value of the scheme liabilities		13%

Defined contribution schemes
The Group also operates defined contribution schemes. The pension charge for the year represents contributions payable by the Group to the schemes (including death in service premiums) and amounted to £0.8m (2001: £0.8m).