UNBOUNCE - EXAMPLE PAGE-REPORT-ENTERPRISE DOCUMENT-KINGSPAN - Flipbook - Page 174
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2021 (continued)
31 Pension Obligations
The Group operates defined contribution schemes in each of its main operating locations. The Group also has a number of defined benefit
schemes in the UK and mainland Europe.
Defined contribution schemes
The total cost charged to profit or loss of €26.3m (2020: €22.0m) represents employer contributions payable to these schemes in
accordance with the rules of each plan. An amount of €4.4m (2020: €2.5m) was included at year end in accruals in respect of defined
contribution pension accruals.
Defined benefit schemes / obligations
The Group has three defined benefit schemes in the UK, all of which are closed to new members and to future accrual. The total pension
contributions to these schemes for the year amounted to €nil (2020: €nil) and the expected contributions for 2022 are €nil (2020: €nil).
The Group also has pension obligations in mainland Europe which are accounted for as defined benefit obligations. These obligations
have been accounted for in line with the Group’s existing pension obligations whereby companies are not required to fund independent
schemes for post employment benefit obligations. Instead, commencing from the date the employee becomes eligible to receive the
income stream, this obligation is satisfied from available cash resources of the relevant employing company. A provision has been made
for the unfunded liability. €1.6m of pension entitlements have been paid to retired former employees during the year (2020: €1.1m).
The pension costs relating to all of the above defined benefit obligations are assessed in accordance with the advice of qualified
actuaries. In the case of the three UK legacy schemes, the most recent actuarial valuations were performed as of 31 December 2021. In
general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to members of the
various schemes.
The UK and European defined benefit schemes expose the Group to the following risks:
Interest Rate Risk: The discount rates employed in determining the present value of the Group’s defined benefit liabilities are set with
reference to corporate bond yields. A decrease in corporate bond yields would increase the schemes’ defined benefit obligation. Such
movements in bond yields would result in volatility in the Group’s Consolidated Financial Statements.
Inflation Risk: A significant proportion of the Group’s defined benefit obligation is linked to inflation therefore higher inflation will result
in a higher defined benefit obligation (subject to the appropriate caps in place to protect the schemes against extreme inflation). This is
however expected to be offset to an extent by an increase in the value of the Group’s holdings in liability driven investments (LDI)-type
plan assets.
Longevity Risk: The present value of the Group’s defined benefit obligation is calculated with reference to the mortality of scheme
members, both during and after employment. If scheme members live longer than expected, the scheme’s benefits will need to be paid
for longer, increasing the scheme’s defined benefit obligation.
The directors note that the Group’s UK defined benefit schemes are also exposed to the following significant risk:
Asset Volatility: The Group’s defined benefit obligations are calculated using discount rates set with reference to corporate bond yields.
The schemes’ assets comprise of equities, bonds, property and LDI, all of which may fluctuate significantly in value. These assets are
expected to outperform corporate bonds in the long term, but provide volatility and risk in the short term.
The extent of the Group’s obligation under these schemes is sensitive to judgemental actuarial assumptions, of which the principal
ones are set out below. It is not considered that any reasonable sensitivity analysis on these assumptions would materially alter the
scheme obligations.
2021
Life expectancies
Life expectancy for someone aged 65 - Males
Life expectancy for someone aged 65 - Females
Life expectancy at age 65 for someone aged 45 - Males
Life expectancy at age 65 for someone aged 45 - Females
Rate of increase in salaries
Rate of increase of pensions in payment
Rate of increase for deferred pensioners
Discount rate
Inflation rate
2020
Funded
Schemes
Un-funded
Schemes
Funded
Schemes
Un-funded
Schemes
22.0
24.1
23.5
25.7
21.1
25.4
23.3
28.1
21.8
23.6
23.1
25.0
20.0
3.08%
2.70%
1.90%
3.30%
1% - 2.75%
0% - 3.15%
-0.15% - 1.85%
1.35% - 3.25%
0% - 2.05%
2.05%
1.35%
2.85%
0% - 2.75%
1.5%
0.3% - 1.5%
1.5% - 1.75%
22.8
It is noted that the ‘Funded Schemes’ relate to the wholly and partly funded UK schemes and 3 partially funded immaterial European
schemes. The ‘Un-funded Schemes’ covers all other European DBOs.
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