Tullett Prebon plc Annual Report 2010
Pensions The Group has two deﬁned beneﬁt pension schemes in the UK which were acquired with Tullett and Prebon, both of which are closed to new members and future accrual. During 2010 the value of the schemes’ assets has increased from £137.7m to £169.5m reﬂecting strong investment returns and the additional contributions. Under IAS 19 the value of the schemes’ liabilities have increased from £139.0m to £145.9m, resulting in a net surplus at 31 December 2010 of £23.6m (2009: net deﬁcit £1.3m). Triennial actuarial valuations of both schemes were undertaken during 2010. These actuarial valuations concluded that each scheme has a signiﬁcant funding surplus. As a result, the Group agreed with the trustees of each scheme that, with effect from February 2011 until the next actuarial valuation, contributions will be equal to the schemes’ administration expenses. Return on capital employed The return on capital employed in 2010 was 40% (2009: 47%) which has been calculated as operating proﬁt divided by average shareholders’ funds adding back cumulative amortised goodwill and acquisition related reorganisation costs net of tax, less net funds, and adjusting for the IAS 19 pension surplus or deﬁcit. Regulatory capital The Group’s lead regulator is the Financial Services Authority (‘FSA’). The Group applied for and received a waiver from the FSA in relation to the Consolidated Supervision requirements of the Capital Requirements Directive effective from 1 January 2007 to 31 December 2011.
Under the terms of the waiver, the Group is subject to the ‘ﬁnancial holding company test’ whereby the aggregate ﬁnancial resources of the Group are calculated by reference to the capital and reserves of the parent company, Tullett Prebon plc, and the Group’s aggregated ﬁnancial resources requirement is calculated as the sum of the requirements of all the Group’s subsidiaries under Pillar 1 of the FSA framework. The Group’s regulatory capital headroom at 31 December 2010 was £461m (2009: £358m). The Board is responsible for approving the Group’s Internal Capital Adequacy Assessment Process (‘ICAAP’) required by the FSA. The ICAAP formally documents that the Group’s capital resources are sufﬁcient to cover the Pillar 1 requirements and assesses whether any additional capital is required to cover those additional risks identiﬁed during the Pillar 2 review. The ICAAP documentation is regularly updated and formally approved by the Board at least annually. Information disclosure under Pillar 3 is available on the Group’s website www.tullettprebon.com. Many of the Group’s broking entities are also regulated on a ‘solo’ basis, and are obliged to meet the regulatory capital requirements imposed by the local regulator of the jurisdiction in which they operate. The Group maintains a signiﬁcant excess of ﬁnancial resources in such entities.