The Transport Act 2000 (Civil Aviation Authority Pension Scheme) Order 2001

SCHEDULE TO APPENDIX 6

1.  The derivation of the price inflation assumption is as follows:

where

gross yield

=

annualised gross redemption yield on the FTSE Actuaries Government Securities 20 year index.

real yield 0% inflation

=

the annualised read redemption yield on the FTSE Actuaries Government Securities Index-Linked over 5 years (0% inflation) Index.

real yield 5% inflation

=

the annualised real redemption yield on the FTSE Actuaries Government Securities Index-Linked over 5 years (5% inflation) Index.

and

2.  However, the above formula takes no account of a minimum annual increase in the Scheme of 0% (ie it is assumed that there will be no “negative increases”). The method of dealing with this is derived from a Black-Scholes formula. Sample results are shown in the table below.

Forward RPI Increase % pa	Pension Increase (in excess of GMP)	Post 5.4.88 GMPIncrease % pa
2.00	2.25	1.73
2.50	2.67	1.95
3.00	3.11	2.16
3.50	3.57	2.35
4.00	4.04	2.51

3.  Sample demographic rates (except for published tables) and a sample of the Salary Scale are set out below.

Men

		Percentage leaving the Scheme in the next year as a result of
Current age	Promotional Salary Scale	Withdrawal from service	Ill-health Retirement
20	122	6.3	0.00
30	209	2.5	0.02
40	261	1.0	0.09
50	300	0.0	0.43
60	335	0.0	0.00

Women

		Percentage leaving the Scheme in the next year as a result of
Current age	Promotional Salary Scale	Withdrawal from service	Ill-health Retirement
20	122	8.4	0.00
30	209	3.3	0.02
40	261	1.3	0.09
50	300	0.0	0.43
60	335	0.0	0.00

4.  Enhanced early retirement terms are available to ATCOs as set out in an ATCO Flexible Retirement Agreement dated 30 April 1993 between CAA and the Institution of Professional, Managers and Specialists, and as subsequently amended prior to the Effective Date (the ATCO Agreement). The cost of this is met from a special reserve within the Scheme. This reserve will be calculated as 8.5% of the value of the actuarial liabilities as at the Effective Date in respect of normal health retirement benefits of Current Members who are ATCOs and are subject to the ATCO Agreement. This percentage has been derived from the actuarial valuation calculations as at 31 December 1998.