Reward means much more to us than just salary. It's also about wellbeing, learning and development, and career. During 2007 we have built on the foundations laid in previous years to take all of these areas forward in meeting the needs of our business.

We've acquired a number of other companies in recent years, all of whom had their own terms and conditions of employment and reward structures. During 2007, we worked to reduce the variety and complexity of terms and conditions in operation. Different businesses are at different stages in this strategy and 2007 saw the development and delivery of a clearer and simpler landscape to support our values and performance based culture.

Our employee benefits have been further developed with a view to empowering employees to tailor their packages to suit their individual needs rather than having a 'one size fits all' approach, including the extension of our flexible benefits scheme, 'My Choice', to more colleagues.

Pensions

We have one main pension scheme called the E.ON UK Group of the Electricity Supply Pension Scheme (ESPS). The scheme has eight benefit categories predominantly providing final salary (defined) benefits with a small proportion of members having money purchase/defined contribution benefits. The benefit category new employees enter is a career average retirement balance arrangement called the E.ON UK Retirement Balance Plan, which is still of defined benefit structure by nature, but works differently to a final salary scheme.

The E.ON UK Retirement Balance Plan is open to all employees as soon as they join the company.

The obligations to pay the benefits are met exclusively from the assets of the E.ON UK Group of the ESPS, which are separately ring-fenced from the assets of E.ON UK plc under an irrevocable Trust managed by a Corporate Trustee body (consisting of both member-elected and company-appointed directors) on behalf of the members and beneficiaries. The funding of the scheme is, however, the responsibility of our company as the principal employer.

Following the Schemes' triennial valuation at 31 March 2007, the value of the assets of the E.ON UK Group of the ESPS was £4.955 billion. The value of the scheme's technical provisions (liabilities) was £5.250 billion, giving a funding level of 94.4%.

We're committed to fully funding the Pension Scheme and we have agreed to pay additional contributions of £60.9 million a year for the next six years to clear this shortfall. In addition, we've agreed to increase our regular contributions from 17% to 23% of members' pensionable salaries for final salary members.

Member contribution rates vary depending on which benefit category of the scheme an employee has joined. The largest proportion pays a rate of 6% of pensionable salary.

We opened a window of opportunity in March 2007 giving all employees not in a pension scheme the chance to join the E.ON UK Retirement Balance Plan. This was supported by a full communications plan including letters to employees, coverage in employee newspapers, articles on our intranet, a dedicated helpline and pension road-shows across most of our major sites. Just under 1,200 employees elected to join the scheme during the window, increasing the pension participation rate to approximately 65% of our 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 2007 around 32% of our eligible employees had taken up the opportunity.