The Group sponsors defined benefit arrangements in certain countries, the most material being a defined benefit pension plan in the Netherlands. This is a funded career average pay arrangement, where pensionable salary is subject to a cap. The arrangement is financed through an insurance contract.
The other defined benefit pension arrangements operated by the Company are unfunded: Jubilee awards of £182,000 (2016: £187,000) for employees in the Netherlands are recognised within other payables in the Consolidated Statement of Financial Position as at 30 June 2017.
The pension cost relating to the defined benefit pension arrangement in the Netherlands is assessed in accordance with the advice of an independent qualified actuary using the projected unit method.
The major actuarial assumptions used by the actuary were:
|Rate of increase in accrued pensions of active members||0.80%||1.00%|
|Rate of increase in pensions in payment||0.00%||0.00%|
|Rate of increase in pensions in deferment||0.00%||0.00%|
In valuing the liabilities of the pension scheme at 30 June 2017 and 30 June 2016, mortality assumptions have been made as indicated below.
The mortality assumption follows the Prognosetafel AG2016 (2016: Prognosetafel AG2014) mortality tables with an experience adjustment in line with the ES-P2 tables as published by the Dutch Alliance of Insurers.
|Assumed life expectations on retirement age||Male||Female|
|Retiring today (age 67)||19.6||21.8|
|Retiring in 20 years (age 47)||21.9||24.2|
The assumptions used by the Group are the best estimates chosen by the Directors from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.
|Present value of funded defined benefit obligations||(17,907)||(17,360)|
|Fair value of scheme assets||14,898||13,639|
|Net pension scheme deficit||(3,009)||(3,721)|
Movements in Present Value of Defined Benefit Obligations
|Defined benefit obligation at beginning of the period||17,360||7,210|
|— (Gain)/loss from change in financial assumptions||(3,429)||4,814|
|— Loss from change in demographic assumptions||122||—|
|— Experience losses||658||2,034|
|Foreign exchange difference on translation||1,097||2,059|
|Defined benefit obligations at end of the period||17,907||17,360|
Movements in Fair Value of Scheme Assets
|Fair value of scheme assets at beginning of the period||13,639||5,899|
|— Premium adjustment||483||62|
|— Return on plan assets||(1,058)||5,235|
|Foreign exchange difference on translation||884||1,627|
|Fair value of scheme assets at end of the period||14,898||13,639|
Analysis of the Amount Charged to the Income Statement
|Net interest cost||39||17|
|Net pension expense||1,819||1,008|
Cumulative Analysis of the Amount Charged to the Other Statement of Consolidated Income
|Amounts charged in previous periods||2,570||1,019|
|Actuarial (gain)/loss on defined benefit pension scheme||(2,074)||1,551|
|Net pension expense||496||2,570|
The Group's defined benefit pension scheme in the Netherlands is financed through an insurance contract. Under this contract, a market price for the assets in respect of this insurance contract is not available. In accordance with IAS 19 for such insurance policies, an asset value has been calculated by discounting expected future cash flows. The discount rate used for this calculation reflects the risk associated with the scheme assets and the maturity or expected disposal date of those assets.
The fair value of the scheme's assets is as follows:
|Total fair value of assets||14,898||13,639|
|Actual return on scheme assets||230||194|
|Discount rate used to value assets||2.10%||1.50%|
The long term rate of return on pension plan assets is determined by aggregating the expected return for each asset class over the strategic asset allocation as at the year end. This rate of return is then adjusted for any expected profit sharing based on market related returns on notional loans.
The scheme's assets do not include any of the Group's own financial instruments or any property occupied by or other assets used by the Group.
The employer has a contract with the insurance company Nationale-Nederlanden to cover the committed pension benefits.
The employer contributions expected to be paid into the scheme for the next financial period amount to £680,069 (2016: £630,000).
History of Amounts in the Current Period
|Present value of funded defined benefit obligations||(17,907)||(17,360)||(7,210)||(5,927)||(4,722)|
|Fair value of scheme assets||14,898||13,639||5,899||4,857||3,726|
|Deficit in the scheme||(3,009)||(3,721)||(1,311)||(1,070)||(996)|
The sensitivity of the defined benefit obligation to change in the weighted principal assumptions is:
|Impact on defined benefit obligation|
|Change in assumption||Increase in assumption||Decrease in assumption|
|Discount rate||0.25%||Decrease by 6.8%||Increase by 7.4%|
|Salary growth rate||0.25%||Increase by 0.7%||Decrease by 0.7%|
|Inflation rate||0.25%||Increase by 0.2%||Decrease by 0.3%|
|Increase by 1 year|
|Decrease by 1 year|
|Life expectancy||Increase by 2.7%||Decrease by 2.7%|
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of financial position.