13.2 Pension benefits
Details of each Executive Director’s pension and lump sum life assurance entitlement, and the annual contributions (as percentages of pensionable salaries) required to meet the costs of providing those benefits, are as follows:

Table 2	Normal retirement age	Pension as a % of final salary	Lump sum life assurance as a multiple of salary	Cost of benefits as a % of salary
James Crosby	60	66.7	4	52
Mike Ellis	60	66.7	4	55
Phil Hodkinson	60	55.3	4	52
Andy Hornby	60	66.7	4	45
Colin Matthew	60	66.7	4	26
George Mitchell	60	66.7	4	26
Mark Tucker	60	n/a	4	26

Notes to Table 2
Note 1
Pension is generally based on retirement from service at normal retirement age (age 60) and is based on final salary disregarding, where relevant, the earnings cap as defined in the Finance Act 1989. Pension and lump sum life assurance is provided from the Bank of Scotland 1976 Pension Scheme (the ‘Scheme’), for Colin Matthew and George Mitchell, and from the Halifax Retirement Fund (the ‘Fund’), for James Crosby, Mike Ellis, Phil Hodkinson and Andy Hornby, to the extent permitted by legislation, and otherwise from separate arrangements with the Group. The overall pensions shown generally accrue at rates of one sixtieth of salary for each year of service (for members of the Scheme) and one thirtieth of salary for each year of service (for members of the Fund).

Note 2
Costs are based on estimates, by the actuaries to the Scheme and to the Fund, from Watson Wyatt LLP, of the costs to the Group over the future service periods of the Executive Directors using “attained age” rates. Costs are calculated on funding assumptions adopted for actuarial valuations of the Scheme and the Fund and do not distinguish between the costs of providing benefits from the Scheme and the Fund and the costs of providing benefits from separate arrangements. The costs exclude those covered by personal contributions from Executive Directors but include allowance for the current cost of self-insuring the risk benefits for death in service and ill-health retirement.

Note 3
On death after retirement or after leaving service, a spouse’s pension equal to 50% of the member’s pension for the Scheme and 66.7% of the member’s pension for the Fund may be payable. Children’s benefits may also be payable.

Under the Scheme, Executive Directors require the consent of the Company before retiring early. Under the Fund, Executive Directors have a contractual right to retire at age 55 or above with a non-reduced pension and at age 50 or above (but below age 55) with a reduced pension.

Pension increases after retirement are a mixture of guaranteed and discretionary. Scheme pensions in respect of service before 6 April 1997 are not guaranteed to increase. Scheme pensions in respect of service after 5 April 1997 are guaranteed to increase in line with the Retail Prices Index, subject to a maximum of 5% p.a. The Fund guarantees to increase pensions in line with the Retail Prices Index, subject to a maximum of 5% p.a. and a minimum of 3% p.a. (no minimum for pensionable service after 31 March 2004). There is an established policy of reviewing pensions on a discretionary basis taking account of increases in the Retail Prices Index.

Allowance is made in transfer values on leaving in respect of the guaranteed and discretionary increases outlined above.

Note 4
The potential pension arrangements for Mark Tucker are not included in Table 1a but are set out in Note 7 to Table 1a. Their value is currently included in Table 2 opposite.

The pension entitlements of the Executive Directors included in final salary (defined benefit) schemes are set out in the table below:

Table 3
Name	Age	Accrued pension at 31.12.04 £000 p.a.	Increase in accrued pension during 2004 £000 p.a.	Transfer value at		Increase in transfer value less Director’s contributions £000
				31.12.03 £000	31.12.04 £000
James Crosby	48	494	68 [55]	5,768	7,427	1,627 [767]
Mike Ellis	53	368	37 [27]	5,820	7,196	1,354 [482]
Phil Hodkinson	46	47	17 [16]	358	608	233 [182]
Andy Hornby	37	115	26 [23]	683	958	251 [154]
Colin Matthew	54	270	31 [24]	3,276	4,074	798 [356]
George Mitchell	54	353	29 [20]	3,564	4,175	611 [243]

Notes to Table 3:
Note 1
The accrued pension at 31 December 2004 is the pension which the Director would have been entitled to receive based on his completed pensionable service, had he left on 31 December 2004, payable from normal retirement age (age 60) and subject to revaluation increases between leaving and retirement.

Note 2
The increase in accrued pension is the accrued pension at 31 December 2004 less the accrued pension at 31 December 2003. The amount shown in square brackets is calculated on the basis of the disclosure methodology under the requirements of the Listing Requirements of the UK Listing Authority.

Note 3
The transfer values are based on the accrued pensions at 31 December 2003 and at 31 December 2004 and are calculated as at 31 December 2003 and 31 December 2004 respectively based on factors supplied by the actuaries, from Watson Wyatt LLP, of the relevant pension schemes. The transfer values are the notional lump sums which would have been paid to another pension scheme for the benefit of the Director had he left service at the respective dates. It is not possible for a transfer value to be paid directly to the Director personally. The amount shown in square brackets is calculated on the basis of the disclosure methodology under the requirements of the Listing Requirements of the UK Listing Authority.

The arrangements for George Mitchell currently provide for some of his benefits to be paid on an unreduced basis only from age 65 (and, in these circumstances the transfer values (£000) at 31 December 2003 and 31 December 2004 are £2,981 and £3,507) but he has a right, shortly before age 60, to elect that all his benefits are paid on an unreduced basis at age 60. The transfer values shown in the table for George Mitchell assume that all of his benefits would be taken on an unreduced basis at age 60.

Note 4
The Director’s contribution is the personal contribution required under the terms of the Fund. No personal contribution is required under the terms of the Scheme. The contributions for James Crosby, Phil Hodkinson and Andy Hornby are aggregates of the personal contributions required under the terms of the Fund, subject to the statutory limit, together with the amounts of salary they gave up as additional pension contributions as outlined in Note 5 to Table 1a. Members of the Group’s pension schemes have the option to pay additional voluntary contributions; neither the contributions nor the resulting benefits are included in Table 3.

Note 5
Mark Tucker is not included in any defined benefit scheme of the Group. There were no other contributions by the Group to any money purchase pension arrangements in respect of any Director during 2004.