The Postal Services Act 2011 (Transfer of Assets) Order 2012

Article 2

SCHEDULE 2 FINANCIAL ASSUMPTIONS

The liabilities of the RMPP must be determined using the financial assumptions set out in this Schedule.

Nominal discount rate	Term-dependent discount rate equal to the spot yield on UK nominal gilts plus a margin of 0.41% pa post-retirement and 1.01% pre-retirement.
RPI inflation	Term-dependent inflation rate equal to the UK gilt implied inflation spot yield.
Real discount rate (net of RPI)	Term-dependent assumption derived at each duration geometrically from nominal discount rate and RPI inflation assumptions, where:
	(1 + real discount rate) = (1 + nominal discount rate)/(1 + RPI inflation)
Differential between RPI and CPI inflation	Annual CPI inflation to be assumed lower than annual RPI inflation by the following margins (where for example 2012-13 means 1 April 2012 to 31 March 2013)—
	-    2012/13 - 0.6%     -    2013/14 - 0.8%     -    2014/15 - 1.1%     -    2015/16 - 1.6%     -    2016/17 - 1.9%     -    2017/18 - 1.578%     -    2018/19 - 1.310%     -    2019/20 - 1.088%     -    2020/21 - 0.903%     -    2021/22 and thereafter - 0.750%
Salary growth	-    April 2012: 3.5% nominal(1)     -    Thereafter: 1% pa in excess of RPI inflation In each case adjusted for clerical staff in accordance with the age-related scale shown in Schedule 3.
Pension increases	In line with the relevant inflation index (RPI or CPI) according to the provision of the appropriate section of the Amended RMPP Rules, with no adjustment for caps or floors.
Expense reserve	1.2% of the liability for active members at the end of the Cut-Off Date assessed by reference to the RMPP Cut-Off Date Rules.

(1)

Annual increases are assumed to take place in April each year.