Notes to the accounts

6 Pension costs

Spectris plc operates funded defined benefit and defined contribution pension plans for the group's qualifying employees in the UK. In addition, six overseas subsidiaries provide defined benefit plans. Other UK and overseas subsidiaries have their own defined contribution plans invested in independent funds, and the group operates a defined contribution plan in the USA for those subsidiaries which do not have separate company plans.

Defined contribution plans

The total cost to Spectris plc of the defined contribution plans for the year ended 31 December 2004 was £6.3m (2003: £4.8m).

There were no outstanding or prepaid contributions to these plans as at 31 December 2004 (or at 31 December 2003).

Defined benefit plans
The last full actuarial valuations were carried out as at the following dates:

Plan name	Date of last full actuarial valuation
Spectris Pension Plan	31 December 2002
Servomex Pension and Assurance Scheme	30 June 2002
Brüel & Kjær Vibro GmbH	31 December 2004
Hottinger Baldwin Messtechnik GmbH	31 December 2004
Spectris GmbH Sensoren und Systeme	31 December 2004
BTG Mütek GmbH	31 December 2004
Brüel & Kjær GmbH	31 December 2004
PANalytical GmbH	31 December 2004

The valuations were updated to 31 December 2004 for FRS 17 purposes by qualified independent actuaries.

The total contributions made to the defined benefit plans in the year ended 31 December 2004 were £1.5m (2003: £1.1m). Contributions have been agreed at the following rates for future years:

Plan name	Agreed company future contribution rate
Spectris Pension Plan	11% plus £480,000 pa (unchanged from 2004)
Servomex Pension and Assurance Scheme	10.5% pa plus £196,000 pa (unchanged from 2004, but increasing to 10.5% plus £430,000 pa from 1 April 2005)

The above contribution rates are subject to review at future valuations and periodical certifications of the Schedule of Contributions. No committed contribution rate from the company applies for the German plans.

The Spectris Pension Plan and the Servomex Pension and Assurance Scheme are closed schemes and hence under the Projected Unit Method, used to calculate the service cost under FRS 17, the current service cost will increase as the members of the plans approach retirement.

back to top

a) Plan liabilities and costs
The major assumptions used by the actuary to value the liabilities of the defined benefit plans were:

UK plans					2004 % pa	2003 % pa	2002 % pa
Discount rate					5.30	5.50	5.60
Salary increases					4.40	4.30	3.80
Pension increases in payment					2.90 for LPI*	2.80 for LPI*	2.30 for LPI*
Pension increases in deferment					2.90	2.80	2.30
Inflation assumption					2.90	2.80	2.30
German plans					2004 % pa	2003 % pa	2002 % pa
Discount rate					4.75	5.50	5.50
Salary increases					2.50	2.50	2.50
Pension increases in payment					1.75	1.75	1.75
Pension increases in deferment					-	-	-
Inflation assumption					2.50	2.50	2.50
*LPI is Limited Price Indexation. Different rates of pension increases apply to some members of the Spectris Pension Plan and the Servomex Pension and Assurance Scheme; the liabilities have been valued at the appropriate rates.
The fair value of the assets held by the defined benefit plans as at 31 December 2004 and the expected rate of return assumed for each asset class for the year from 1 January 2005 are:
UK plans					2004 Fair value £m	2003 Fair value £m	2002 Fair value £m
Equities					26.4	26.9	29.3
Bonds					31.3	27.2	23.0
Other					0.6	1.2	1.3
Total					58.3	55.3	53.6
					2004 Expected return % pa	2003 Expected return % pa	2002 Expected return % pa
Equities					8.00	8.00	8.00
Bonds					5.00	5.30	4.60
Other					4.50	4.00	4.00
Total					6.40	6.60	6.40
German plans					2004 Fair value £m	2003 Fair value £m	2002 Fair value £m
Insurance policies					1.1	1.1	1.0
					2004 Expected return % pa	2003 Expected return % pa	2002 Expected return % pa
Insurance policies					4.75	5.50	5.50
The plan assets and liabilities at 31 December are summarised as follows:
	2004				2003
	UK plans £m	German plans £m	Total £m		UK plans £m	German plans £m	Total £m
Total market value of assets	58.3	1.1	59.4		55.3	1.1	56.4
Present value of plan liabilities	(74.0)	(6.1)	(80.1)		(68.4)	(5.7)	(74.1)
Deficit in plan	(15.7)	(5.0)	(20.7)		(13.1)	(4.6)	(17.7)
Related deferred tax asset	4.7	2.0	6.7		3.9	1.8	5.7
Net pension liability	(11.0)	(3.0)	(14.0)		(9.2)	(2.8)	(12.0)

back to top

b) Analysis of the amount charged to operating profit

	2004				2003
	UK plans £m	German plans £m	Total £m		UK plans £m	German plans £m	Total £m
Current service costs	(0.7)	(0.1)	(0.8)		(0.6)	(0.1)	(0.7)

back to top

c) Analysis of the amount (charged)/credited to other finance costs

	2004				2003
	UK plans £m	German plans £m	Total £m		UK plans £m	German plans £m	Total £m
Expected return on pension scheme assets	3.6	0.1	3.7		3.4	0.1	3.5
Interest on pension scheme liabilities	(3.7)	(0.3)	(4.0)		(3.4)	(0.3)	(3.7)
	(0.1)	(0.2)	(0.3)		-	(0.2)	(0.2)

back to top

d) Analysis of the amount recognised in statement of total recognised gains and losses

	2004				2003
	UK plans £m	German plans £m	Total £m		UK plans £m	German plans £m	Total £m
Actual return less expected return on pension scheme assets	1.1	-	1.1		2.7	-	2.7
Experience gains and losses arising on scheme liabilities	(0.5)	-	(0.5)		(0.8)	(0.2)	(1.0)
Changes in assumption underlying the present value of liabilities	(3.6)	(0.4)	(4.0)		(6.2)	-	(6.2)
Actuarial loss	(3.0)	(0.4)	(3.4)		(4.3)	(0.2)	(4.5)

back to top

e) Movement in deficit

	2004				2003
	UK plans £m	German plans £m	Total £m		UK plans £m	German plans £m	Total £m
Deficit in scheme at beginning of the year	(13.1)	(4.6)	(17.7)		(9.1)	(4.3)	(13.4)
Movement in the year:
Contributions	1.2	0.3	1.5		0.9	0.2	1.1
Current service cost	(0.7)	(0.1)	(0.8)		(0.6)	(0.1)	(0.7)
Other finance expense	(0.1)	(0.2)	(0.3)		-	(0.2)	(0.2)
Actuarial loss	(3.0)	(0.4)	(3.4)		(4.3)	(0.2)	(4.5)
Deficit in scheme at end of the year	(15.7)	(5.0)	(20.7)		(13.1)	(4.6)	(17.7)

back to top

f) History of experience gains and losses

	2004			2003			2002			2001			2000
	UK plans £m	German plans £m		UK plans £m	German plans £m		UK plans £m	German plans £m		UK plans £m	German plans £m		UK plans £m	German plans £m
Actual return less expected return on pension scheme assets	1.1	-		2.7	-		(10.7)	-		(10.8)	-		(4.2)	-
Percentage of plan assets	2%	-		5%	-		(20%)	-		(17%)	-		(6%)	-
Experience gains and losses arising on the plan liabilities	(0.5)	-		(0.8)	(0.2)		(3.4)	(0.5)		2.9	0.1		(0.9)	-
Percentage of the present value of the plan liabilities	1%	-		(1%)	(4%)		(5%)	(10%)		5%	2%		(1%)	-
Changes in assumptions underlying the present value of the plan liabilities	(3.6)	(0.4)		(6.2)	-		(0.2)	-		1.9	-		1.0	(0.3)
Actuarial (loss)/gain	(3.0)	(0.4)		(4.3)	(0.2)		(14.3)	(0.5)		(6.0)	0.1		(4.1)	(0.3)
Percentage of the present value of the plan liabilities	(4%)	(7%)		(6%)	(4%)		(23%)	(10%)		10%	2%		(7%)	(11%)

back to top

g) Company

Certain of Spectris plc's employees participate in the Spectris Pension Plan, a UK multi-employer defined benefit scheme. The company is unable to identify its share of the Plan's underlying assets and liabilities and therefore accounts for it as a defined contribution scheme. The Plan had a deficit of £9.6m at 31 December 2004 (2003: £7.8m deficit). The actuary certified on the basis of the 1 January 2004 valuation that employer contributions of 11% plus £480,000 pa would be made in the financial year ending 31 December 2004. Contributions paid in that year to the Spectris Pension Plan were £745,000 (2003: £602,000) and to defined contribution plans were £381,000 (2003: £232,000).

back to top