Notes to the accounts

For the year ended 31st December 2007


27 Subordinated liabilities (continued)

(b) Dated loan capital

Dated loan capital, issued by the Bank for the development and expansion of the Group’s business and to strengthen its capital base, by Barclays Bank Spain SA (Barclays Spain), Barclays Bank of Botswana Ltd (BBB), Barclays Bank Zambia PLC (Barclays Zambia) and Barclays Bank of Kenya (Barclays Kenya) to enhance their respective capital bases and by Absa and Barclays Bank of Ghana Ltd (BBG) for general corporate purposes, comprise:

2007  2006 
Notes  £m  £m 
Non-convertible 
The Bank 
7.4% Subordinated Notes 2009 (US$400m) a   200  204 
Subordinated Fixed to CMS-Linked Notes 2009 (€31m) b   23  21 
12% Unsecured Capital Loan Stock 2010  a   27  27 
5.75% Subordinated Notes 2011 (€1,000m) a   724  676 
5.25% Subordinated Notes 2011 (€250m) (ex-Woolwich plc) a   200  186 
Floating Rate Subordinated Notes 2012  –  301 
Callable Subordinated Floating Rate Notes 2012  –  44 
Step-up Callable Floating Rate Subordinated Bonds 2012 (ex-Woolwich plc) –  151 
Callable Subordinated Floating Rate Notes 2012 (US$150m) –  77 
Floating Rate Subordinated Notes 2012 (US$100m) –  51 
Capped Floating Rate Subordinated Notes 2012 (US$100m) –  51 
Floating Rate Subordinated Notes 2013 (US$1,000m) b , n   501  513 
5.015% Subordinated Notes 2013 (US$150m) a   77  77 
4.875% Subordinated Notes 2013 (€750m) a   583  540 
5.5% Subordinated Notes 2013 (DM 500m) d , n   196  179 
Floating Rate Subordinated Step-up Callable Notes 2013 (Yen 5,500m) b , n   25  24 
Floating Rate Subordinated Notes 2013 (AU$150m) c , n   67  61 
5.93% Subordinated Notes 2013 (AU$100m) e , n   44  41 
Callable Floating Rate Subordinated Notes 2015 (US$1,500m) b , n   753  767 
4.38% Fixed Rate Subordinated Notes 2015 (US$75m) a   30  37 
4.75% Fixed Rate Subordinated Notes 2015 (US$150m) a   85  76 
Floating Rate Subordinated Step-up Callable Notes 2016 (US$750m) b , n   375  382 
Callable Floating Rate Subordinated Notes 2016 (€1,250m) b , n   927  844 
Callable Floating Rate Subordinated Notes 2017 (US$500m) b , n   250  255 
10.125% Subordinated Notes 2017 (ex-Woolwich plc) k , n   111  113 
Floating Rate Subordinated Step-up Callable Notes 2017 (US$1,500m) b , n   749  – 
Floating Rate Subordinated Step-up Callable Notes 2017 (€1,500m) b , n   1,106  – 
6.05% Fixed Rate Subordinated Notes 2017 (US$2,250m) a   1,125  – 
Floating Rate Subordinated Notes 2018 (€40m) b   29  27 
Floating Rate Subordinated Notes 2019 (€50m) b   36  32 
Callable Fixed/Floating Rate Subordinated Notes 2019 (€1,000m) l   761  696 
9.5% Subordinated Bonds 2021 (ex-Woolwich plc) a   282  290 
Subordinated Floating Rate Notes 2021 (€100m) b   72  66 
Subordinated Floating Rate Notes 2022 (€50m) b   37  34 
Subordinated Floating Rate Notes 2023 (€50m) b   37  34 
Fixed/Floating Rate Subordinated Callable Notes 2023  r , n   505  – 
5.75% Fixed Rate Subordinated Notes 2026  a   600  608 
5.4% Reverse Dual Currency Subordinated Loan 2027 (Yen 15,000m) m   71  66 
6.33% Subordinated Notes 2032  a   49  50 
Subordinated Floating Rate Notes 2040 (€100m) b   73  67 
Barclays Bank SA, Spain (Barclays Spain)
Subordinated Floating Rate Capital Notes 2011 (€30m) b   10  22 
Absa 
14.25% Subordinated Callable Notes 2014 (ZAR 3,100m) f , n   253  269 
10.75% Subordinated Callable Notes 2015 (ZAR 1,100m) g , n   87  89 
Subordinated Callable Notes 2015 (ZAR 400m) h , n   29  29 
8.75% Subordinated Callable Notes 2017 (ZAR 1,500m) i , n   111  113 
8.8% Subordinated Fixed Rate Callable Notes 2019 (ZAR 1,725m) s , n   123  – 
8.1% Subordinated Callable Notes 2020 (ZAR 2,000m) j , n   138  143 
Barclays Bank of Ghana Ltd (BBG)
14% Fixed Rate BBG Subordinated Callable Notes 2016 (GHC 100,000m) a , n   5  6 
Barclays Bank of Kenya (Barclays Kenya)
Floating Rate Subordinated Notes 2014 (KES 1,000m) t   8  – 
Dated loan capital – non-convertible  11,494  8,339 

27 Subordinated liabilities (continued)

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2007  2006 
Notes  £m  £m 
Convertible 
Barclays Bank of Botswana (BBB)
Subordinated Unsecured Floating Rate Capital Notes 2014 (BWP 100m) n , o   8  9 
Barclays Bank Zambia PLC (Barclays Zambia)
Subordinated Unsecured Floating Rate Capital Notes 2015 (ZMK 40,000m) n , p   6  5 
Absa 
Redeemable cumulative option-holding preference shares (ZAR 147m) q   11  11 
Total convertible  25  25 

None of the Group’s dated loan capital is secured. The debt obligations of the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa rank ahead of the interests of holders of their equity. Dated loan capital of the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa has been issued on the basis that the claims there under are subordinated to the respective claims of their depositors and other unsecured unsubordinated creditors.

Interest
Notes
a
The interest rates on these Notes are fixed for the life of those issues.
b
These Notes bear interest at rates fixed periodically in advance based on London or European interbank rates.
c
These Notes bear interest at rates fixed periodically in advance based on Sydney Bill of exchange rates.
d
These Notes bear a fixed rate of interest until 2008. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on London interbank rates.
e
These Notes bear a fixed rate of interest until 2008. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on London interbank rates.
f
These Notes bear a fixed rate of interest until 2009. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference rate for a further period of five years.
g
These Notes bear a fixed rate of interest until 2010. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.
h
These Notes bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.
i
These Notes bear a fixed rate of interest until 2012. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.
j
These Notes bear a fixed rate of interest until 2015. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.
k
These Notes bear a fixed rate of interest until 2012. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.
l
These Notes bear a fixed rate of interest until 2014. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on European interbank rates.
m
This Loan bears a fixed rate of interest based on a US Dollar principal amount, but the interest payments have been swapped, resulting in a Yen interest rate payable which is fixed periodically in advance based on London interbank rates.
n
Repayable at the option of the issuer, prior to maturity, on conditions governing the respective debt obligations, some in whole or in part, and some only in whole.
o
These Notes bear interest at rates fixed periodically in advance based on the Bank of Botswana Certificate Rate. All of these Notes will be compulsorily converted to Preference Shares of BBB, having a total par value equal in sum to the principal amount of Notes outstanding at the time of conversion, should BBB experience pre-tax losses in excess of its retained earnings and other capital surplus accounts.
p
These Notes bear interest at rates fixed periodically in advance based on the Bank of Zambia Treasury Bill rate. All of these Notes will be compulsorily converted to Preference Shares of Barclays Zambia, having a total par value equal in sum to the principal amount of Notes outstanding at the time of conversion, should Barclays Zambia experience pre-tax losses in excess of its retained earnings and other capital surplus accounts.
q
The dividends are compounded and payable semi-annually in arrears on 30th September and 31st March of each year. The shares were issued by Absa Group Limited on 1st July 2004 and the redemption dates commence on the first business day after the third anniversary of the date of issue of the redeemable preference shares and ending on the fifth anniversary of the date of issue. Such exercise and notice will be deemed to be effective only on the option exercise dates, being 1st March, 1st June, 1st September or 1st December of each year. The shares are convertible into ordinary shares at the option of the preference shareholders on the redemption dates in lots of 100.
r
These Notes bear a fixed rate of interest until 2018. After that date in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on London interbank rates.
s
These Notes bear a fixed rate of interest until 2014. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.
t
These Notes bear interest at rates fixed periodically in advance based on the Central Bank of Kenya Treasury Bill rates.

Notes to the accounts

For the year ended 31st December 2007


27 Subordinated liabilities (continued)

The 7.4% Subordinated Notes 2009 (the ‘7.4% Notes’) issued by the Bank have been registered under the US Securities Act of 1933. All other issues of dated loan capital by the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa, which were made in non-US markets, have not been so registered. With respect to the 7.4% Notes, the Bank is not obliged to make (i) a payment of interest on any interest payment date unless a dividend is paid on any class of share capital and (ii) a payment of principal until six months after the respective maturity date with respect to such Notes.

Repayment terms

Unless otherwise indicated, the Group’s dated loan capital outstanding at 31st December 2007 is redeemable only on maturity, subject in particular cases, to provisions allowing an early redemption in the event of certain changes in tax law or, in the case of BBB and Barclays Zambia to certain changes in legislation or regulations.

Any repayments prior to maturity require in the case of the Bank, the prior notification to the FSA, in the case of BBB, the prior approval of the Bank of Botswana, in the case of Barclays Zambia, the prior approval of the Bank of Zambia, and in the case of Absa, the prior approval of the South African Registrar of Banks.

There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity.

28 Provisions

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Undrawn 
contractually 
committed 
facilities 
Redundancy  and 
Onerous  and re-  guarantees  Sundry 
contracts  structuring  provided  provisions  Total 
£m  £m  £m  £m  £m 
At 1st January 2007  71  102  46  243  462 
Acquisitions and disposals of subsidiaries  1  (2) –  74  73 
Exchange  –  –  8  5  13 
Additions  18  117  560  121  816 
Amounts used  (25) (117) (113) (60) (315)
Unused amounts reversed  (5) (18) (26) (174) (223)
Amortisation of discount  4  –  –  –  4 
At 31st December 2007  64  82  475  209  830 
At 1st January 2006  79  74  55  309  517 
Exchange  (2) 2  –  (16) (16)
Additions  45  180  35  159  419 
Amounts used  (53) (133) (9) (94) (289)
Unused amounts reversed  (2) (21) (35) (115) (173)
Amortisation of discount  4  –  –  –  4 
At 31st December 2006  71  102  46  243  462 

Provisions expected to be recovered or settled within no more than 12 months after 31st December 2007 were £645m (2006: £388m).

Sundry provisions are made with respect to commission clawbacks, warranties and litigation claims.

Undrawn contractually committed facilities and guarantees provided includes £360m (2006: £nil) provision against undrawn facilities on ABS CDO Super Senior positions.

29 Securitisations

The Group was party to securitisation transactions involving Barclays residential mortgage loans, business loans and credit card balances. In addition, the Group acts as a conduit for commercial paper, whereby it acquires static pools of residential mortgage loans from other lending institutions for securitisation transactions.

In these transactions, the assets, or interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a special purpose entity, or to a trust which then transfers its beneficial interests to a special purpose entity, which then issues floating rate debt securities to third-party investors.

Securitisations may, depending on the individual arrangement result in continued recognition of the securitised assets and the recognition of the debt securities issued in the transaction; lead to partial continued recognition of the assets to the extent of the Group’s continuing involvement in those assets or to derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or retained in the transfer. Full derecognition only occurs when the Group transfers both its contractual right to receive cash flows from the financial assets, or retains the contractual rights to receive the cash flows, but assumes a contractual obligation to pay the cash flows to another party without material delay or reinvestment, and also transfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk.

The following table shows the carrying amount of securitised assets, stated at the amount of the Group’s continuing involvement where appropriate, together with the associated liabilities, for each category of asset in the balance sheet:

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2007  2006 
Carrying  Carrying 
amount of  Associated  amount of  Associated 
assets  liabilities  assets  liabilities 
£m  £m  £m  £m 
Loans and advances to customers 
Residential mortgage loans  16,000  (16,786) 12,577  (13,271)
Credit card receivables  4,217  (3,895) 5,700  (5,195)
Other personal lending  422  (485) 229  (255)
Wholesale and corporate loans and advances  8,493  (8,070) 5,852  (5,303)
Total  29,132  (29,236) 24,358  (24,024)
Assets designated at fair value through profit or loss 
Retained interest in residential mortgage loans  895  –  628  – 

Retained interests in residential mortgage loans are interest only strips which represent a continuing exposure to the prepayment and credit risk in the underlying securitised assets, the total amount of which was £23,097m (2006: £15,063m). These are initially recorded as an allocation of the original carrying amount based on the relative fair values of the portion derecognised and the portion retained.

Notes to the accounts

For the year ended 31st December 2007


30 Retirement benefit obligations

Pension schemes

The UK Retirement Fund (UKRF), which is the main scheme of the Group, amounting to 94% of all the Group’s schemes in terms of benefit obligations, comprises ten sections.

The 1964 Pension Scheme

Most employees recruited before July 1997 are members of this non-contributory defined benefit scheme. Pensions are calculated by reference to service and pensionable salary and are normally subject to a deduction from State pension age.

The Retirement Investment Scheme (RIS)

A defined contribution plan for most joiners between July 1997 and 1st October 2003. This was closed to new entrants on 1st October 2003 and the large majority of existing members of the RIS transferred to afterwork in respect of future benefit accrual with effect from 1st January 2004. There are now no longer any active members of the RIS.

The Pension Investment Plan (PIP)

A defined contribution plan created from 1st July 2001 to provide benefits for certain employees of Barclays Capital.

afterwork

Combines a contributory cash balance element with a voluntary defined contribution element. New employees since 1st October 2003 are eligible to join afterwork. In addition, the large majority of active members of the RIS (now closed) were transferred to afterwork in respect of future benefit accrual after 1st January 2004.

Career Average Section

The Career Average Section was established in the UKRF with effect from 1st May 2004 following the transfer of members from the Woolwich Pension Fund. The Career Average Section is a non-contributory career average scheme and was closed to new entrants on 1st December 2006.

1951 Fund Section, AP89 Section, BCPS Section, CCS Section and Mercantile Section

Five new sections were established in the UKRF with effect from 31st March 2007 following the merger of the UKRF with five smaller schemes sponsored from within the Group. All five sections are closed to new members.

The 1951 Fund Section, AP89 Section and Mercantile Section provide final salary benefits calculated by reference to service and pensionable salary.

The BCPS and CCS Sections provide defined contribution benefits. The benefits built up in these sections in relation to service before 6th April 1997 are subject to a defined benefit minimum.

In addition, the costs of ill-health retirements and death in service benefits are generally borne by the UKRF for each of the ten sections.

Governance

The assets of the UKRF are held separately from the assets of the Group and are administered by trustees.

Barclays Pension Fund Trustees Ltd (BPFTL) acts as corporate trustee for the UKRF. BPFTL is a private limited company, incorporated on 20th December 1990, and is a subsidiary of Barclays Bank PLC.

As the corporate trustee for the UKRF, BPFTL is the legal owner of the assets of the UKRF and BPFTL holds these assets in trust for the beneficiaries of the scheme.

BPFTL comprises nine Directors, of which six are Employer Directors selected by the Bank and three are Employee Directors nominated by the Pension Fund Advisory Committee (PFAC). Employee Directors are selected from those eligible active employees and pensioner members who apply to be considered for the role.

Employee Director vacancies are advertised to all eligible active and pensioner members. This enables any eligible member with an interest in becoming an Employee Director to express that interest and be considered for the role. The PFAC provides the mechanism through which Employee Directors are selected. The PFAC will accept nominations from eligible members and select from amongst all properly nominated candidates.

There are also three Alternate Employer Directors and three Alternate Employee Directors. The selection process for these appointments are as detailed above. The role of alternate directors is to provide cover for individual directors, should they not be available for meetings.

Currently, the Bank decides the funding rate after consulting with the trustees. Under the Pensions Act 2004, which has practical impact for the UKRF for the triennial valuation currently in progress with an effective date of 30th September 2007, the Bank and the trustee must agree the funding rate (including a recovery plan to fund any deficit against the scheme specific statutory funding objective).

In addition to the UKRF, there are other defined benefit and defined contribution schemes in the UK and overseas. The same approach to pensions governance applies to the other schemes in the UK but different legislation covers schemes outside of the UK where in most cases the Bank has the power to determine the funding rate.

30 Retirement benefit obligations (continued)

The following tables present an analysis of defined benefit obligation and fair value of plan assets for all the Group’s pension schemes and post-retirement benefits (the latter are unfunded) and present the amounts recognised in the income statement including those related to post-retirement health care.

Income statement charge
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2007  2006  2005 
Other post-  Other post-  Other post- 
retirement  retirement  retirement 
Pensions  benefits  Total  Pensions  benefits  Total  Pensions  benefits  Total 
£m  £m  £m  £m  £m  £m  £m  £m  £m 
Staff cost charge 
Current service cost  332  2  334  378  21  399  348  22  370 
Interest cost  905  8  913  900  8  908  853  4  857 
Expected return on scheme assets  (1,074) –  (1,074) (999) –  (999) (898) –  (898)
Recognised actuarial loss  (1) –  (1) 3  1  4  4  –  4 
Past service cost  20  –  20  29  –  29  13  1  14 
Curtailment or settlements  (32) –  (32) (29) –  (29) (49) –  (49)
Total included in staff costs  150  10  160  282  30  312  271  27  298 

Staff costs are included in other operating expenses.

Change in benefit obligation
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2007 2006
Post-retirement Post-retirement
Pensions benefits Total  Pensions benefits Total 
UK  Overseas  UK  Overseas  UK  Overseas  UK  Overseas 
£m  £m  £m  £m  £m  £m  £m  £m  £m  £m 
Benefit obligation at 
beginning of the year  (17,256) (894) (97) (76) (18,323) (18,149) (938) (103) (79) (19,269)
Current service cost  (317) (15) (1) (1) (334) (358) (20) (20) (1) (399)
Interest cost  (869) (36) (4) (4) (913) (863) (37) (4) (4) (908)
Past service cost  (20) –  –  –  (20) (4) (25) –  –  (29)
Curtailments or settlements  35  1  –  –  36  43  2  –  –  45 
Actuarial gain/(loss) 1,292  25  19  1  1,337  1,566  15  11  (3) 1,589 
Contributions by plan participants  (19) (2) –  –  (21) (15) (2) –  –  (17)
Benefits paid  589  31  2  15  637  536  40  19  4  599 
Business combinations  –  –  –  –  –  –  11  –  –  11 
Exchange and other adjustments  2  (23) 21  (33) (33) (12) 60  –  7  55 
Benefit obligation at end of the year  (16,563) (913) (60) (98) (17,634) (17,256) (894) (97) (76) (18,323)

The benefit obligation arises from plans that are wholly unfunded and wholly or partly funded as follows:

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2007  2006 
£m  £m 
Unfunded obligations  (248) (237)
Wholly or partly funded obligations  (17,386) (18,086)
Total  (17,634) (18,323)

Notes to the accounts

For the year ended 31st December 2007


30 Retirement benefit obligations (continued)

Change in plan assets
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2007  2006 
Post-retirement Post-retirement
Pensions benefits Total  Pensions benefits Total 
UK  Overseas  UK  Overseas  UK  Overseas  UK  Overseas 
£m  £m  £m  £m  £m  £m  £m  £m  £m  £m 
Fair value of plan assets at 
beginning of the year  16,761  745  –  –  17,506  15,571  819  –  –  16,390 
Expected return on plan assets  1,041  33  –  –  1,074  965  34  –  –  999 
Employer contribution  355  34  2  15  406  357  26  2  4  389 
Settlements  –  (1) –  –  (1) (11) (2) –  –  (13)
Contributions by plan participants  19  2  –  –  21  15  2  –  –  17 
Actuarial (loss)/gain  (332) (11) –  –  (343) 423  25  –  –  448 
Benefits paid  (589) (31) (2) (15) (637) (536) (30) (2) (4) (572)
Business combinations  –  –  –  –  –  –  –  –  –  – 
Exchange and other adjustments  (24) 25  –  –  1  (23) (129) –  –  (152)
Fair value of plan assets at 
the end of the year  17,231  796  –  –  18,027  16,761  745  –  –  17,506 

Amounts recognised on balance sheet

The pension and post-retirement benefit assets and liabilities recognised on the balance sheet are as follows: Excel File Download table as excel file

2007  2006 
Post-retirement Post-retirement
Pensions benefits Total  Pensions benefits Total 
UK  Overseas  UK  Overseas  UK  Overseas  UK  Overseas 
£m  £m  £m  £m  £m  £m  £m  £m  £m  £m 
Benefit obligation at 
end of period  (16,563) (913) (60) (98) (17,634) (17,256) (894) (97) (76) (18,323)
Fair value of plan assets at 
end of period  17,231  796  –  –  18,027  16,761  745  –  –  17,506 
Net asset/(deficit) 668  (117) (60) (98) 393  (495) (149) (97) (76) (817)
Unrecognised actuarial (gains)/losses  (1,912) 7  (3) 14  (1,894) (953) 20  17  14  (902)
Net recognised liability  (1,244) (110) (63) (84) (1,501) (1,448) (129) (80) (62) (1,719)
Recognised assets  –  36  –  –  36  53  35  –  –  88 
Recognised liability  (1,244) (146) (63) (84) (1,537) (1,501) (164) (80) (62) (1,807)
Net recognised liability  (1,244) (110) (63) (84) (1,501) (1,448) (129) (80) (62) (1,719)

The UKRF measured using the IAS 19 assumptions, has moved over the year from a £0.5bn deficit at 31st December 2006 to a surplus of £0.7bn at 31st December 2007.

The assumptions used for the current year and prior year are detailed on the next page. Among the reasons for this change were the increase in AA long-term corporate bond yields which resulted in a higher discount rate of 5.82% (31st December 2006: 5.12%), partially offset by lower than expected returns, and an increase in the inflation assumption to 3.45% (31st December 2006: 3.08%). A number of additional changes were made to the assumptions used in valuing the liabilities, including a decrease in the assumed rate of real salary increases to 0.5% (31st December 2006: 1%). Mortality assumptions changed from those in force at 31st December 2006.

30 Retirement benefit obligations (continued)

Assumptions

Obligations arising under defined benefit schemes are actuarially valued using the projected unit credit method. Under this method, where a defined benefit scheme is closed to new members, such as in the case of the 1964 Pension Scheme, the current service cost expressed as a percentage of salary is expected to increase in the future, although this higher rate will be applied to a decreasing payroll. The latest actuarial IAS valuations were carried out as at 31st December using the following assumptions:

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UK schemes Overseas schemes
2007  2006  2007  2006 
% p.a.  % p.a.  % p.a.  % p.a. 
Discount rate  5.82  5.12  7.51  6.94 
Rate of increase in salaries  3.95  4.08  5.60  5.66 
Inflation rate  3.45  3.08  4.13  3.94 
Rate of increase for pensions in payment  3.45  2.88  3.55  3.58 
Rate of increase for pensions in deferment  3.30  3.08  2.50  2.24 
Initial health care inflation  8.00  8.93  10.00  9.93 
Long-term health care inflation  5.00  5.00  5.01  5.00 
Expected return on plan assets  6.70  6.32  7.84  7.89 

The expected return on plan assets assumption is weighted on the basis of the fair value of these assets. Health care inflation assumptions are weighted on the basis of the health care cost for the period. All other assumptions are weighted on the basis of the defined benefit obligation at the end of the period.

The UK Schemes discount rate assumption is based on the yield on the iBoxx (over 15 year) AA corporate bond index.

The overseas health care inflation assumptions relate to the US and Mauritius.

Mortality assumptions

The post-retirement mortality assumptions used in valuing the liabilities of the UKRF were based on the standard 2000 series tables as published by the Institute and Faculty of Actuaries. These tables are considered to be most relevant to the population of the UKRF based on their mortality history. These were then adjusted in line with the actual experience of the UKRF’s own pensioners relative to the standard table. An allowance has been made for future mortality improvements based on the medium cohort projections published by the CMIB. On this basis the post-retirement mortality assumptions for the UKRF includes:

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2007  2006  2005  2004  2003 
Longevity at 60 for current pensioners (years)
– Males  26.7  25.8  25.8  25.7  23.3 
– Females  27.9  29.5  29.5  29.4  26.4 
Longevity at 60 for future pensioners currently aged 40 (years)
– Males  28.0  27.1  27.1  27.0  24.9 
– Females  29.1  30.7  30.6  30.6  27.9 

Notes to the accounts

For the year ended 31st December 2007


30 Retirement benefit obligations (continued)

Assumptions (continued)

Sensitivity analysis

Sensitivity analysis for each of the principal assumptions used to measure the benefit obligation of the UKRF are as follows:

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Impact on UKRF benefit obligation
(Decrease)/  (Decrease)/ 
Increase  Increase 
%  £bn 
0.5% increase to: 
– Discount rate  (8.5) (1.4)
– Rate of inflation  8.8  1.4 
– Rate of salary growth  1.3  0.2 
1 year increase to longevity at 60  2.5  0.4 

Post-retirement health care

A one percentage point change in assumed health care trend rates, assuming all other assumptions remain constant would have the following effects for 2007:

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1% increase  1% decrease 
£m  £m 
Effect on total of service and interest cost components  1.9  (1.3)
Effect on post-retirement benefit obligation  19.9  (14.6)

Assets

A long-term strategy has been set for the asset allocation of the UKRF which comprises a mixture of equities, bonds, property and other appropriate assets. This recognises that different asset classes are likely to produce different long-term returns and some asset classes may be more volatile than others.

The long-term strategy ensures that investments are adequately diversified. Asset managers are permitted some flexibility to vary the asset allocation from the long-term strategy within control ranges agreed with the trustee from time to time.

The UKRF also employs derivative instruments, where appropriate, to achieve a desired exposure or return, or to match assets more closely to liabilities. The value of assets shown below reflects the actual physical assets held by the scheme, with any derivative holdings reflected on a mark to market basis. The expected return on asset assumptions, both for individual asset classes and overall, have been based on the portfolio of assets created after allowing for the net impact of the derivatives on the risk and return profile of the holdings.

The value of the assets of the schemes, their percentage in relation to total scheme assets, and their expected rate of return at 31st December 2007 and 31st December 2006 were as follows:

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2007
UK schemes Overseas schemes Total
% of  Expected  % of  Expected  % of  Expected 
total fair  rate  total fair  rate  total fair  rate 
value of  of  value of  of  value of  of 
Value  scheme  return  Value  scheme  return  Value  scheme  return 
£m  assets  %  £m  assets  %  £m  assets  % 
Equities  7,467  43  8.3  441  55  8.4  7,908  44  8.3 
Bonds  7,445  43  5.1  300  38  7.6  7,745  43  5.2 
Property  1,712  10  7.0  16  2  11.5  1,728  10  7.0 
Derivatives  (12) –  0.0  –  –  –  (12) –  – 
Cash  284  2  5.1  42  5  5.6  326  1  5.2 
Other  335  2  5.3  (3) –  –  332  2  5.4 
Fair value of plan assets a   17,231  100  6.7  796  100  7.8  18,027  100  6.8 

Note
a
Excludes £782m (2006: £613m) representing the money purchase assets of the UKRF.

30 Retirement benefit obligations (continued)

Assets (continued)
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2006
UK schemes Overseas schemes Total
% of  Expected  % of  Expected  % of  Expected 
total fair  rate  total fair  rate  total fair  rate 
value of  of  value of  of  value of  of 
Value  scheme  return  Value  scheme  return  Value  scheme  return 
£m  assets  %  £m  assets  %  £m  assets  % 
Equities  7,285  43  7.9  337  45  9.4  7,622  44  8.0 
Bonds  6.930  41  4.7  300  40  6.2  7,230  41  4.7 
Property  1,995  12  6.4  15  2  13.4  2,010  11  6.6 
Derivatives  21  –  n/a  –  –  –  21  –  n/a 
Cash  293  2  4.6  37  5  5.9  330  2  4.8 
Other  237  2  5.9  56  8  9.4  293  2  6.6 
Fair value of plan asset a   16,761  100  6.3  745  100  7.9  17,506  100  6.4 

The UKRF plan assets include £39m relating to UK private equity investments (2006: £27m) and £664m relating to overseas private equity investments (2006: £447m). These are disclosed within Equities.

Amounts included in the fair value of plan assets include £6m (2006: £7m) relating to shares in Barclays Group, £6m (2006: £10m) relating to bonds issued by the Barclays Group, £nil (2006: £1m) relating to other investments in the Barclays Group, and £10m (2006: £8m) relating to property occupied by Group companies.

The expected return on assets is determined by calculating a total return estimate based on weighted average estimated returns for each asset class. Asset class returns are estimated using current and projected economic and market factors such as inflation, credit spreads and equity risk premiums.

The actual return on plan assets was £731m (2006: £1,447m).

Actuarial gains and losses

The actuarial gains and losses arising on plan liabilities and plan assets are as follows:

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UK schemes Overseas schemes Total
2007  2006  2005  2004  2007  2006  2005  2004  2007  2006  2005  2004 
£m  £m  £m  £m  £m  £m  £m  £m  £m  £m  £m  £m 
Present value of obligations  (16,623) (17,353) (18,252) (15,574) (1,011) (970) (1,017) (587) (17,634) (18,323) (19,269) (16,161)
Fair value of plan assets  17,231  16,761  15,571  13,261  796  745  819  436  18,027  17,506  16,390  13,697 
Net surplus/(deficit)
in the plans  608  (592) (2,681) (2,313) (215) (225) (198) (151) 393  (817) (2,879) (2,464)
Experience gains and 
losses on plan liabilities 
– amount  (297) 48  (2) 16  (79) (54) (2) (31) (376) (6) (4) (15)
– as percentage of 
   plan liabilities  (2%) –  –  – (8%) (6%) –  (5%) (2%) –  –  – 
Difference between 
actual and expected 
return on net assets 
– amount  (332) 423  1,599  570  (11) 25  2  9  (343) 448  1,601  579 
– as percentage of 
   plan assets  (2%) 3%  10%  4%  –  3%  –  2%  (2%) 3%  10%  4% 

Note
a
Excludes £782m (2006: £613m) representing the money purchase assets of the UKRF.

Notes to the accounts

For the year ended 31st December 2007


30 Retirement benefit obligations (continued)

Funding

The most recent triennial funding valuation of the UK Retirement Fund was performed in September 2004 and forms the basis of the Group’s commitment that the fund has sufficient assets to make payments to members in respect of their accrued benefits as and when they fall due. This funding valuation uses a discount rate that reflects the assumed future return from the actual asset allocation at that date, and takes into account projected future salary increases when assessing liabilities arising from accrued service. The funding valuation is updated annually on the basis of interim assumptions. The UK Retirement Fund recorded a funding surplus of £1.2bn as at 31st December 2007 (2006: £1.3bn).

The Group has agreed funding contributions which, in aggregate, are no less than those which are sufficient to meet the Group’s share of the cost of benefits accruing over each year. The Group has, in the recent past, chosen to make funding contributions in excess of this, more consistent with the IAS service cost.

Defined benefit contributions paid with respect to the UKRF were as follows:

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£m 
Contributions paid 
2007  355 
2006  351 
2005  354 

There is a triennial valuation currently in progress with an effective date of 30th September 2007. To comply with the requirements of the Pensions Act 2004, the Group and trustees plan to agree a scheme specific funding target, statement of funding principles, and a schedule of contributions which in 2008 will supersede those in place under the current actuarial funding valuation.

Excluding the UKRF, the Group is expected to pay contributions of approximately £2m to UK schemes and £41m to overseas schemes in 2008.

The total contribution to be paid in 2008 to the UKRF is not expected to be significantly different than in previous years.

31 Ordinary shares and share premium

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Number of  Ordinary  Share 
shares  shares  premium  Total 
m  £m  £m  £m 
At 1st January 2007  6,535  1,634  5,818  7,452 
Issued to staff under the Sharesave Share Option Scheme  19  6  62  68 
Issued under the Incentive Share Option Plan  10  2  40  42 
Issued under the Executive Share Option Scheme a   –  –  1  1 
Issued under the Woolwich Executive Share Option Plan a   –  –  1  1 
Transfer to retained earnings  –  –  (7,223) (7,223)
Issue of new ordinary shares  337  84  1,357  1,441 
Repurchase of shares  (300) (75) –  (75)
At 31st December 2007  6,601  1,651  56  1,707 
At 1st January 2006  6,490  1,623  5,650  7,273 
Issued to staff under the Sharesave Share Option Scheme  18  5  67  72 
Issued under the Incentive Share Option Plan  25  6  96  102 
Issued under the Executive Share Option Scheme a   1  –  3  3 
Issued under the Woolwich Executive Share Option Plan a   1  –  2  2 
At 31st December 2006  6,535  1,634  5,818  7,452 

The authorised share capital of Barclays PLC is £2,500m (2006: £2,500m), comprising 9,996 million (2006: 9,996 million) ordinary shares of 25p each and 1 million (2006: 1 million) staff shares of £1 each. All issued shares are fully paid.

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2007  2006 
Called up share capital, allotted and fully paid  £m  £m 
Ordinary shares: 
At beginning of year  1,633  1,622 
Issued to staff under the Sharesave Share Option Scheme  6  5 
Issued under Incentive Share Option Plan  2  6 
Issue of new ordinary shares  84  – 
Repurchase of shares  (75) – 
At end of year  1,650  1,633 
Staff shares  1  1 
Total  1,651  1,634 
Note
a
The nominal value for share options issued during 2007 and 2006 for the Executive Share Option Scheme and Woolwich ESOP was less than £500,000 in each case.