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NOTE 19
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PENSION COSTS AND LIABILITIES
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THE GROUP'S PENSION PLANS
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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.
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DEFINED BENEFIT PLANS
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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.
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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.
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Defined contribution plans
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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.
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Other service related long-term benefits
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In addition to the pension schemes described above, Ferd has obligations related to future health services for some groups of employees in the USA.
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ECONOMIC ASSUMPTIONS
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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).
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Economic assumptions in Norwegian companies at 31 December
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2016
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2015
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Discount rate
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2.00%
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1.90%
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Expected wage growth
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2.50%
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2.50%
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Future expected pension regulation
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1.75%
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1.75%
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Expected regulation at base amount (G)
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2.25%
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2.25%
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Interval for economic assumptions in foreign companies at 31 December
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2016
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2015
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Discount rate
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0.60 - 3.91 %
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0.75 - 4.08 %
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Expected wage growth
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0.00 - 1.00 %
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0.00 - 1.00 %
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Future expected pension regulation
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0.00 - 1.75 %
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0.00 - 1.75 %
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PENSION OBLIGATIONS
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Reconciliation of net liability against balance sheet
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NOK 1 000
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2016
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2015
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Pension liabilities for defined benefit pension plans
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-176 129
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-193 138
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Pension assets for defined benefit pension plans
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4 415
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25 370
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Total defined benefit obligation recognised in the Group's balance sheet
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-171 714
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-167 768
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DEFINED BENEFIT PLANS
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Specification of recognised liability
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NOK 1 000
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2016
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2015
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Present value of unfunded pension liabilities
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-64 095
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-63 867
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Present value of wholly or partly funded obligations
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-485 704
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-599 766
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Total present value of defined benefit obligations
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-549 799
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-663 633
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Fair value of pension assets
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378 085
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495 865
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Total defined benefit obligation recognised in the Group's balance sheet
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-171 714
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-167 768
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Movements in liabilities for defined benefit pension plans
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NOK 1 000
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2016
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2015
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Liability for defined benefit pension plans at 1 January
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663 967
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613 116
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Present value of current service cost
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11 203
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10 533
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Interest expenses on the pension liability
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17 883
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18 435
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Demographic estimate deviation on the pension liability
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12 173
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-17 783
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Financial estimate deviation on the pension liability
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334
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5 626
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Settlement of pension plans
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-47 567
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- 6
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Curtailment of pension plans
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3 863
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-
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Change in liability due to acquisition/sale of subsidiaries
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- 313
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-
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Benefits paid
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-79 635
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-43 452
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Social security tax
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- 186
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- 396
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Exchange differences on foreign plans
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-31 922
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77 894
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Liability for defined benefit pension plans at 31 December
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549 799
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663 967
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Expected payments of defined pension liabilities
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NOK 1 000
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2016
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Defined benefit pension expected to fall due year 1-5
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235 553
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Defined benefit pension expected to fall due year 6-10
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135 921
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Defined benefit pension expected to fall due year 11-20
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170 637
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Defined benefit pension expected to fall due year 21-30
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7 688
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Total benefit pension due
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549 799
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Movement in fair value of pension assets for defined benefit pension plans
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NOK 1 000
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2016
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2015
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Fair value of pension assets at 1 January
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496 445
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461 090
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Expected return from pension assets
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13 390
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13 584
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Financial estimate deviation on the pension assets
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15 541
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-8 891
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Contributions from employer
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12 456
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12 363
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Administration expenses
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-3 102
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-1 270
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Contributions from employees
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1 661
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1 699
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Increase in pension funds due to the acquisition of subsidiaries
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-4 071
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-
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Settlements
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-44 734
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-2 829
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Benefits paid
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-76 669
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-39 369
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Exchange difference on foreign plans
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-32 831
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59 489
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Fair value of pension assets at 31 December
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378 085
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495 865
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Pension assets include the following
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NOK 1 000
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Of which active market:
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2016
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2015
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Equity instruments
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86 717
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87 634
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120 613
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Government stock
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153 515
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175 005
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351 254
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Corporate stock
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5 908
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7 001
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6 475
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Other debt instruments, including structured debt
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1 934
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2 018
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441
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Property investments
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836
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6 559
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11 328
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Bank deposits
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264
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427
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2 093
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Other assets
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97 355
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99 441
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3 661
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Total pension funds
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346 528
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378 085
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495 865
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Actuarial deviations recognised in othercomprehensive income
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NOK 1 000
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2016
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2015
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Current year actuarial deviation on pension liabilities (defined benefit schemes)
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-12 506
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12 157
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Current year actuarial deviation on pension funds (defined benefit schemes)
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12 138
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-8 891
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Tax effect (note 9)
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3 402
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- 988
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Net actuarial deviation on defined benefit schemes
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3 034
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2 279
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PENSION COSTS
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NOK 1 000
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2016
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2015
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Defined benefit plans
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27 317
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17 893
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Defined contribution plans
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125 103
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115 310
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Total pension costs recognised in current year payroll costs
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152 421
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133 203
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DEFINED BENEFIT PLAN PENSION COSTS
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Pension costs recognised in income statement
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NOK 1 000
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2016
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2015
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Present value of this year's pension earned
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11 203
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10 533
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Contribution from employees
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-1 661
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-1 699
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Curtailment of pension schemes and plan changes
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14 859
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8 185
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Social security tax
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- 186
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- 396
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Administration costs
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3 102
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1 270
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Total pension costs from benefit schemes recognised in salary costs
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27 317
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17 893
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Interest expense on the pension liability
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17 883
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18 435
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Expected return on pension funds
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- 13 390
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- 13 584
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Total pension costs from benefit schemes recognised in finance costs
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4 492
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4 850
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