Notes to the Accounts

11. Employee information

The details of the emoluments of the directors of Pearson plc are shown the personnel committee report and form part of these audited financial statements.

Pension schemes The Group operates a number of pension schemes throughout the world. The major schemes are self-administered and the schemes’ assets are held independently of the Group. Pension costs are assessed in accordance with the advice of independent qualified actuaries. The principal schemes were of the defined benefit type, the most significant of which was the UK Group scheme. There are a number of other defined contribution schemes, principally overseas. The cost of the schemes is as follows:

note The main reasons for the increase in the pension cost in 2001 compared to the previous year are: the new valuation of the UK scheme resulting in a reduction in the valuation surplus and an increase in the number of members of defined contribution schemes following the acquisition of NCS and Dorling Kindersley in 2000.

During the year, the main defined benefit scheme for US employees was closed to the great majority of active members. The closure of the plan will give rise to a reduction in defined benefit and an increase in defined contribution costs in the future. The curtailment had no impact on the pension costs in 2001.

The most recent full actuarial valuation of the UK Group scheme was performed as at 1 January 2001, using the projected unit method of valuation. The market value of the assets of the scheme at this date was £1,166m. The major assumptions used to determine the SSAP24 charge are as follows:

The valuation surplus is being apportioned, in accordance with SSAP24, over the expected remaining service lives of the current employees.

The disclosures required under the transitional arrangements of FRS17 for the Group’s defined benefit schemes are set out below.

For the purpose of these disclosures the valuation of the UK Group scheme and other schemes has been updated by independent actuaries to 31 December 2001 using the weighted average assumptions listed below.

The contribution rate for 2001 and 2002 for the UK Group Scheme is 17.1% of pensionable salaries.

The assets of the UK Group scheme and the expected rate of return on these assets, and the assets of the other defined benefit schemes and the expected rate of return on these assets shown as a weighted average, are as follows:

note The measurement of the surplus/(deficit) in the scheme for FRS 17 follows a different approach to SSAP 24. The FRS 17 measurement date is 31 December 2001, for SSAP 24 it is 1 January 2001. The fall in stock markets in 2001 reducing the market value of the UK scheme assets together with a fall in bond yield rates (the discount rate), increasing the present value of the UK scheme liabilities has resulted in a deficit in the UK scheme under FRS 17.

If the above amounts had been recognised in the financial statements, the Group’s net assets and profit and loss reserve at 31 December 2001 would be as follows:

The net assets and profit and loss reserve exclude the pension liability of £61m included within provisions (see note 23).

Other post-retirement benefits The Group provides certain healthcare and life assurance benefits principally for retired US employees and their dependents. These plans are unfunded. Retirees are eligible for participation in the schemes if they meet certain age and service requirements. Plans that are available vary depending on the business division in which the retiree worked. Plan choices and retiree contributions are dependent on retirement date, business division, option chosen and length of service.

The cost of the benefits and the major assumptions used, based on a measurement date of 30 September 2001, are as follows:

The disclosures required under the transitional arrangements of FRS17 are set out below.

For the purpose of these disclosures the valuation of the schemes has been updated to 31 December 2001 using the assumptions listed below.

The value of the unfunded liability is as follows:

If the above amounts had been recognised in the financial statements, the Group’s net assets and profit and loss reserve at 31 December 2001 would be as follows:

note The net assets and profit and loss reserve exclude the post retirement healthcare liability of £62m included within provisions (see note 23).