Reward means much more than just salary. E.ON UK has acquired companies over the last few years, which means that we now have a number of sets of terms and conditions. We are working to develop a consistent and transparent pay, grading and benefits structure of terms and conditions for all employees and one which reflects our desire to recognise performance. The company plans to invest in excess of £10 million on implementing this part of the Employee Deal.

In addition, we are planning to introduce a flexible benefits scheme called 'My Choice', which will allow employees to choose from a range of options to create the package that best suits them: for instance, trading part of their package for more holiday, childcare and retail vouchers, or travel and medical insurance.

However, making such fundamental changes is challenging. During 2005 dialogue continued with our recognised trade unions as their support is critical in delivering the Reward element of the Employee Deal. Reaching agreement on all areas continued to be slower than we originally anticipated but we believe that positive engagement with all employees and trade unions is important for underpinning the solutions that will allow our business to grow and succeed in the future.

Pensions

The E.ON UK defined benefit pension is open to all employees without restriction, as soon as they join or, where relevant, on completion of their probationary period. Our pension scheme for new starters is called the Retirement Balance Pension Plan. This plan shares the risks between E.ON UK and our employees - at a time when many companies are closing their final salary schemes in favour of schemes that place the risk entirely with the employee.

In 2005, our parent company E.ON AG made a special contribution of £420 million to our main pension scheme, one of the largest single payments made to a UK pension scheme in recent years. The payment substantially reduced the scheme's deficit and helped us to ensure the security of the pension benefits of current and former employees.

Share option and profit share schemes

After 12 months service employees can participate in our share incentive schemes and, as at the end of 2005, around 40% of our eligible employees had taken up the opportunity.