29  Post-retirements benefits

Pensions
The Group's pension schemes are mainly of the defined benefit type and the assets of the schemes are held in separate trustee administered funds.

The pension cost relating to the UK schemes is assessed in accordance with the advice of independent qualified actuaries using the projected unit method. The latest actuarial valuations of the principal schemes were as at March 31, 1998 (for the Vickers Group Pension Scheme), April 5, 1998 (for the Rolls-Royce Group Pension Scheme), and March 31, 2000 (for The Rolls-Royce Pension Fund). The principal assumptions used were that in the long term the average returns on investments would be between 2.5% and 2.75% per annum higher than the average increase in pay and between 3.0% and 4.5% per annum higher than the average increase in pensions. The assets of the Vickers Group Pension Scheme have been valued using the discounted income method assuming that UK equity dividends increase at a rate which is 3.5% less than the return on investments. The assumptions used for the March 1998 valuation of the Vickers Group Pension Scheme were determined by Vickers plc prior to it being acquired by Rolls-Royce plc. For the Rolls-Royce Group Pension Scheme and The Rolls-Royce Pension Fund, assets were valued on a market related basis.

The pension cost relating to overseas schemes is calculated in accordance with local best practice and regulations.

The total pension cost for the Group was £63m (1999 £60m) of which £12m (1999 £7m) relates to overseas schemes.

The aggregate of the market values of the UK schemes at the dates of the latest actuarial valuations was £5,126m. The actuarial value of the assets of the principal schemes represented respectively 99.8% (for The Rolls-Royce Pension Fund), 111.0% (for the Vickers Group Pension Scheme) and 125.0% (for the Rolls-Royce Group Pension Scheme) of the value of the projected accrued liabilities.

The difference between the value of the assets and the value of the projected accrued liabilities (after allowing for expected future increases in earnings and discretionary pension increases) is being amortised over periods of between 9 and 13 years, being the average expected remaining service lives of the pensionable employees.

Prepayments of £157m (1999 £105m) are included in debtors and accruals of £24m (1999 £24m) are included in provisions for liabilities and charges, being the differences between the accumulated amounts paid into the pension funds and the accumulated pension costs.

Post-retirement benefits other than pensions
In the USA, and to a lesser extent in some other countries, the Group's employment practices include the provision of healthcare and life insurance benefits for retired employees. In the USA, 167 retired employees currently benefit from these provisions and it is estimated that 5,200 current employees will be eligible on retirement.

The cost of post-retirement benefits other than pensions for the Group was £14m (1999 £11m). Provisions for the benefit obligations at December 31, 2000 amounted to £102m (1999 £80m) and are included in provisions for liabilities and charges. There were no plan assets at either December 31, 2000 or December 31, 1999. The future costs of benefits are assessed in accordance with the advice of independent qualified actuaries and are based on a weighted average discount rate of 7.5% and a weighted average assumed healthcare costs trend rate of 5%.