Annual report 2015

NOTE 19
PENSION COSTS AND LIABILITIES
       
THE GROUP'S PENSION PLANS
Ferd has established pension schemes in accordance with Norwegian legislation. The employees participate in defined benefit and defined contribution plans complying with the requirements of the mandatory occupational pension.
       
DEFINED BENEFIT PLANS
Defined benefit plans provide employees with the right to defined future pension benefits. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each pension plan. The obligation is an estimate of future benefits that employees have earned based on years of service and salary at retirement. Benefits are discounted to present value, and the recognised obligation is reduced by the fair value of plan assets for funded pension schemes. Changes in assumptions, staff numbers and variances between estimated and actual salary increases and return on assets result in actuarial gains and losses. Actuarial gains and losses and gains and losses resulting from a curtailment or termination of pension plans are recognised immediately in the income statement.
       
The defined benefit pension plans consist of group schemes as well as some additional arrangements, including employees with a retirement basis over 12 G, and AFP.
       
Defined contribution plans
For defined contribution plans, the Group's obligations are limited to making specific contributions. Payments to defined contribution pension plans are recognised as expenses in the income statement when the employees have rendered services entitling them to the contribution.
       
Other service related long-term benefits
In addition to the pension schemes described above, Ferd has obligations related to future health services for some groups of employees in the USA.
       
ECONOMIC ASSUMPTIONS
Ferd has defined benefit plans in several countries with varying economic conditions affecting the assumptions that are the basis for calculating pension obligations. The parameters are adapted to conditions in each country. The discount rate is determined as a weighted average of the yields at the reporting date on at least AA rated corporate bonds, or government bonds in cases where there is no market for AA rated corporate bonds. The government bond interest rate is applied for Norwegian schemes. To the extent that the bond does not have the same maturity as the obligation, the discount rate is adjusted. Actuarial assumptions for demographic factors and retirement are based on generally accepted principles in the insurance business. Future mortality rates are based on statistics and mortality tables (K2013).
       
Economic assumptions in Norwegian companies at 31 December
     
   
2015
2014
Discount rate
 
1,90%
2,70%
Expected wage growth
 
2,50%
3,25%
Future expected pension regulation
 
1,75%
1,75%
Expected regulation of base amount (G)
 
2,25%
3,00%
       
Interval for economic assumptions in foreign companies at 31 December
   
2015
2014
Discount rate
 
0.75 - 4.08 %
1.10 - 4.52 %
Expected wage growth
 
0.00 - 1.00 %
0.00 - 3.75 %
Future expected pension regulation
 
0.00 - 1.75 %
0.00 - 1.75 %
       
PENSION OBLIGATIONS
     
Reconciliation of net liability against balance sheet
     
NOK 1 000
 
2015
2014
Pension liabilities for defined benefit pension plans
 
- 193 138
- 169 417
Pension assets for defined benefit pension plans
 
25 370
17 391
Total defined benefit obligation recognised in the Group's balance sheet
 
- 167 768
- 152 026
       
DEFINED BENEFIT PLANS
     
Specification of recognised liability
     
NOK 1 000
 
2015
2014
Present value of unfunded pension liabilities
 
- 63 867
- 56 988
Present value of wholly or partly funded obligations
 
- 599 766
- 556 128
Total present value of defined benefit obligations
 
- 663 634
- 613 116
Fair value of pension assets
 
495 865
461 090
Total defined benefit obligation recognised in the Group's balance sheet
 
- 167 768
- 152 026
       
Movements in liabilities for defined benefit pension plans
     
NOK 1 000
 
2015
2014
Liability for defined benefit pension plans at 1 January
 
613 116
669 253
Present value of current service cost
 
10 533
17 655
Interest expenses on the pension liability
 
18 435
17 359
Demographic estimate deviation on the pension liability
 
- 17 783
3 214
Financial estimate deviation on the pension liability
 
5 626
70 510
Settlement of pension plans
 
- 6
- 200 726
Curtailment of pension plans
   
- 15 612
Change in liability due to acquisition/sale of subsidiaries
   
9 167
Benefits paid
 
- 43 452
- 22 416
Social security tax
 
- 396
73
Exchange differences on foreign plans
 
77 894
64 639
Liability for defined benefit pension plans at 31 December
 
663 967
613 116
       
Expected payments of defined pension liabilities
     
NOK 1 000
   
2015
Defined benefit pension expected to fall due year 1-5
   
209 334
Defined benefit pension expected to fall due year 6-10
   
207 846
Defined benefit pension expected to fall due year 11-20
   
235 890
Defined benefit pension expected to fall due year 21-30
   
10 898
Total benefit pension due
   
663 967
       
Movement in fair value of pension assets for defined benefit pension plans
     
NOK 1 000
 
2015
2014
Fair value of pension assets at 1 January
 
461 090
532 085
Expected return from pension assets
 
13 584
13 317
Financial estimate deviation on the pension assets
 
- 8 891
19 034
Contributions from employer
 
12 363
10 285
Administration expenses
 
- 1 270
- 1 604
Contributions from employees
 
1 699
1 320
Increase in pension funds due to the acquisition of subsidiaries
   
8 297
Settlements
 
- 2 829
- 154 268
Benefits paid
 
- 39 369
- 18 535
Exchange difference on foreign plans
 
59 489
51 159
Fair value of pension assets at 31 December
 
495 865
461 090
       
Pension assets include the following
     
NOK 1 000
Of which active market:
2015
2014
Equity instruments
118 894
120 613
96 343
Government stock
298 102
351 254
271 396
Corporate stock
5 257
6 475
58 276
Other debt instruments, including structured debt
358
441
4 279
Property investments
1 333
11 328
24 102
Bank deposits
538
2 093
1 602
Other assets
2 099
3 661
5 092
Total pension funds
426 581
495 865
461 090
       
Actuarial deviations recognised in othercomprehensive income
     
NOK 1 000
 
2015
2014
Current year actuarial deviation on pension liabilities (defined benefit schemes)
 
12 157
- 73 724
Current year actuarial deviation on pension funds (defined benefit schemes)
 
- 8 891
19 034
Tax effect (note 9)
 
- 988
2 098
Net actuarial deviation on defined benefit schemes
 
2 278
- 52 592
       
PENSION COSTS
     
NOK 1 000
 
2015
2014
Defined benefit plans
 
17 893
- 28 071
Defined contribution plans
 
115 310
131 120
Total pension costs recognised in current year payroll costs
 
133 203
103 049
       
DEFINED BENEFIT PLAN PENSION COSTS
     
Pension costs recognised in income statement
     
NOK 1 000
 
2015
2014
Present value of this year's pension earned
 
10 533
17 655
Contribution from employees
 
- 1 699
- 1 320
Curtailment of pension schemes and plan changes
 
8 185
- 46 083
Social security tax
 
- 396
73
Administration costs
 
1 270
1 604
Total pension costs from benefit schemes recognised in salary costs
 
17 893
- 28 071
       
Interest expense on the pension liability
 
18 435
17 359
Expected return on pension funds
 
- 13 584
- 13 317
Total pension costs from benefit schemes recognised in finance costs
 
4 850
4 042

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