Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 407 report information sustainability report Governance review review statements Annual Report 2022 KPMG LLP’s independent auditor’s report to the members of Barclays PLC (continued) 4.3 Valuation of the defined benefit pension obligation in respect of the UK Retirement Fund (‘UKRF’) Financial Statement Elements FY22 FY21 Our assessment of risk vs FY21 Our results Defined benefit obligation related to UKRF £20.0bn £30.9bn FY22: 1 Our assessment is that the risk is similar to FY21. (note 33) Acceptable FY21: Acceptable Description of the Key Audit Matter Our response to the risk Subjective valuation Our procedures to address the risk included: The valuation of the defined benefit obligation Control testing: We performed end to end process walkthroughs to identify the key systems, in respect of the UKRF is dependent on key applications and controls used in the defined benefit obligation process. We tested the design and actuarial assumptions, including the discount operating effectiveness of key controls relating to the process. These included: rates, retail price index (‘RPI’) and mortality • controls over management’s review of IAS19 assumptions including the discount rate, RPI and assumptions. Small changes to these mortality assumptions; assumptions may still have a significant impact • reconciliation controls of the IAS19 disclosures to underlying data. on the measurement of the defined benefit pension obligation. Evaluation of management’s expert: We evaluated the objectivity and competence of management’s actuarial expert involved in the valuation of the defined benefit pension obligation. As part of our risk assessment, we determined that the defined benefit pension obligation has Our actuarial expertise: we involved our own actuarial professionals in the following: a high degree of estimation uncertainty, with a • evaluating the judgements made and the appropriateness of methodologies used by management potential range of reasonable outcomes and management’s actuarial expert in determining the key actuarial assumptions; greater than our materiality for the financial statements, and possibly many times that • comparing the assumptions used by Barclays PLC to our independently compiled expected ranges amount. based on market observable indices and our market experience; • evaluating the output from the triennial funding valuation as at 30 September 2022 and the impact At 31 December 2022, the Group reported a on demographic assumptions and future funding requirements. gross defined benefit pension obligation of £20.0bn relating to UKRF. Assessing transparency: We assessed the adequacy of the Group’s financial statements disclosures in the context of the relevant accounting standards. Disclosure quality The disclosures regarding the Group’s application of IAS 19 (including risks, assumptions and sources of estimation uncertainty) are key to explaining the key judgements applied in the IAS 19 Defined Benefit Obligation calculation. Further information in the Annual Report Communications with the Barclays PLC Areas of particular auditor judgement and Accounts: See page 496 for the Board Audit Committee We identified the following as areas of accounting policy on defined benefit Our discussions with and reporting to the particular auditor judgement: schemes, and page 494 for the financial Board Audit Committee included: • Subjective and complex auditor disclosure note 33; Pensions and post- • Our definition of the Key Audit Matter judgement was required in evaluating retirement benefits. relating to the valuation of the defined the key actuarial assumptions used by benefit pension obligation including the the Group (including the discount rate, rationale for not including the valuation retail price index and mortality of pension assets in the key audit assumptions). matter. Our results • We also discussed our audit response to Based on the risk identified and our the key audit matter which included the procedures performed we consider the use of specialists to challenge key valuation of the defined benefit pension aspects of management’s actuarial obligation in respect of UKRF and the valuation. related disclosures to be acceptable (2021 result: acceptable).