2012 Annual report

NOTE 17

PENSION COSTS AND LIABILITIES

THE GROUP'S PENSION PLANS

The Group's companies have established pension plans in accordance with local laws. Employees in the Group's companies in Norway are participating in defined benefit or defined contribution pension plans that comply with the rules for 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 amount 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 contributions for some groups of employees in 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 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. The weighted average discount rate at 31 December 2012 was 2,3 percent. 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. The weighted average long-term expected return on plan assets is 3,8 percent. The expected long-term return is based on the total portfolio, not on the returns of individual pension asset categories. The return is based exclusively on historical returns, without adjustments.

Economic assumptions in Norwegian companies at 31 December

2012

2011

Discount rate

Expected return on pension assets

Expected wage growth

0-3,25%

Future expected pension regulation

Expected regulation of base amount (G)

Interval for the economic assumptions at 31 December

2012

2011

Discount rate

2.00-4.15

2.50-4.70

Expected return on pension assets

2.75-7.00

2.75-7.00

Expected wage growth

0.00-1.00

0.00-4.00

Future expected pension regulation

0.00-0.55

0.00-1.75

PENSION OBLIGATIONS

Reconciliation of net liability against balance sheet

NOK 1 000

2012

2011

Pension liabilities for defined benefit pension plans

Pension assets for defined benefit pension plans

Total defined benefit obligation recognised in the consolidated statement of financial position

DEFINED BENEFIT PLANS

Specification of the recognised liablity

NOK 1 000

2012

2011

Present value of unfunded pension liabilities

Present value of wholly or partly funded obligations

Total present value of defined benefit obligations

 

Fair value of pension assets

Total defined benefit obligation recognised in the consolidated statement of financial position

Movements in liabilities for defined benefit pension plans

NOK 1 000

2012

2011

Liability for defined benefit pension plans at 1 January

Fair value of current service cost

Interest expenses on the pension liability

Actuarial (gains) / losses on the pension liabilities

Settlement of pension plans

Curtailment of pension schemes

Plan changes

Change in liability due to acquisition/sale of subsidiaries

Benefits paid

Social security tax

Exchange differences on foreign plans

Liability for defined benefit pension plans at 31 December

Movement in fair value of pension assets for defined benefit pension plans

NOK 1 000

2012

2011

Fair value of pension assets at 1 January

Expected return from pension assets

Actuarial gains / (losses) on the pension assets

Contributions from employer

Administration expenses

Contributions from employees

Increase in pension funds due to the acquisition of subsidiaries

Settlements

Benefits paid

Exchange difference on foreign plans

Fair value of pension assets at 31 December

Pension assets include the following

NOK 1 000

2012

2011

Equity instruments

Liability instruments

Managed by insurance

Property Investments

Bank deposits

Other assets

Total pension assets

Actuarial (gains) / losses recognised in comprehensive income

NOK 1 000

2012

2011

Current year actuarial (gains) / losses on liabilities (defined benefit schemes)

Current year actuarial (gains) / losses on pension assets (defined benefit schemes)

Total actuarial (gains) / losses recognised in comprehensive income (defined benefit schemes)

PENSION COSTS

NOK 1 000

2012

2011

Defined benefit plans

Defined contribution plans

Early retirement and other schemes

Total pension costs recognised in current year payroll costs

DEFINED BENEFIT PLAN PENSION COSTS

Pension costs recognised in income statement

NOK 1 000

2012

2011

Present value of this year's pension earned

Contribution from employees

Curtailment of pension schemes and plan changes

Interest expenses on the pension liability

Expected return on pension assets

Social security tax

Administration costs

Total pension costs recognised in the Group's income statement