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Annual Report and Accounts 2014
4.5 Retirement benefits
IMI offers a number of defined benefit arrangements to employees that will not be paid until more than a year after the period in which they are earned,
for example pension benefits, jubilee plans, post-employment and other long-term employee benefit arrangements.
There is a significant degree of estimation involved in predicting the ultimate benefits payable under these defined benefit arrangements in respect of which
the Group holds net liabilities on its balance sheet. This section explains how the value of these benefits payable and any assets funding the arrangements are
accounted for in the Group financial statements and gives details of the key assumptions upon which the estimations are based.
Assets and liabilities for defined contribution arrangements are minimal as they relate solely to short-term timing differences between the period during which
benefits have accrued and when contributions are paid into schemes.
Defined Contribution (‘DC’): Arrangements where the employer pays fixed contributions into an external fund on behalf of the employee (who is responsible for
making the investment decision and therefore assumes the risks and rewards of fund performance). Contributions to these arrangements are recognised in the
consolidated income statement as incurred.
Defined Benefit: A defined benefit pension plan is a pension arrangement in which the employer promises a specified annual benefit on retirement that is
predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns.
In some cases, this benefit is paid as a lump sum on leaving the Company or while in the service of the Company rather than as a pension. The Group underwrites
one or more risks in meeting these obligations and therefore any net liability or surplus in these arrangements in shown on the Group balance sheet.
4.5.1 Summary information
Net pension deficit: £34.7m (2013: £157.9m)
The net pension deficit or ‘net liability for defined benefit obligations’ (‘DBO’) at 31 December 2014 was £34.7m (2013: £157.9m). A further £nil (2013: £0.8m)
was recognised in liabilities held for sale. The assets and liabilities of the schemes are aggregated, recognised in the consolidated balance sheet and shown
within non-current liabilities or in non-current assets if a scheme is in surplus and it is recoverable.
Number of Defined Benefit arrangements: 64 (2013: 74)
Ten schemes were divested on 1 January 2014, as part of the disposal of the Retail Dispense businesses. A further scheme in Sweden had its liabilities
bought-out on 1 September 2014 via an insurance contract. In the UK, the IMI Pension Fund commenced winding-up procedures and has been replaced
by two new Schemes (‘the UK Funds’).
The Group provides pension benefits through a mixture of funded and unfunded defined benefit and defined contribution (‘DC’) arrangements, although its
strategy is to move away from defined benefit arrangements towards defined contribution arrangements wherever possible to minimise the liability of the Group.
Assessments of the obligations of the defined benefit plans are carried out by independent actuaries, based on the projected unit credit method. An historical
split of the types of defined benefit schemes in operation is as follows:
Defined
% benefit
%
Qty
Assets
of total
obligation
of total
Type of scheme
No.
£m assets
£m liabilities
2014
Final salary*
23
1,369.8
93% (1,362.7)
90%
Cash balance**
12
101.0
7% (127.4)
9%
Jubilee***
11
-
0% (2.0)
0%
Other
18
5.0
0% (18.3)
1%
Total
64
1,475.8
100% (1,510.4)
100%
Asset ceiling
(0.1)
Revised assets
1,475.7
2013
Final salary*
28
1,189.1
92% (1,321.2)
91%
Cash balance**
13
99.4
8% (112.1)
8%
Jubilee***
13
-
0% (2.1)
0%
Other
20
5.1
0% (16.6)
1%
Total
74
1,293.6
100% (1,452.0)
100%
Asset Ceiling
(0.3)
Revised assets
1,293.3
* Final Salary scheme:
The pension available to a member in a final salary
arrangement will be a proportion of the member’s salary at or around their
retirement date. This proportion will be determined by the member’s length of
pensionable service, their accrual rate and any particular circumstances under
which the member retires (for example early ill-health retirement).
** Cash Balance:
A cash balance scheme is a form of defined benefit pension
under which the member has the right to a defined lump sum on retirement
rather than a defined amount of pension receivable. For example a cash
balance plan may have minimum or guaranteed rates of return on pension
contributions. The amount of pension to which that lump sum may be converted
is determined by the annuity rates prevailing at the time of conversion.
*** Jubilee:
Jubilee plans provide for cash award payments which are based on
completed lengths of service. These payments are often made on cessation of
service with the Company, subject to a minimum period of service.
