2013 Annual report

NOTE 15

PENSION COSTS AND LIABILITIES

 

FERD'S PENSION PLANS

Ferd has established pension schemes in accordance with Norwegian legislation. The employees participate in defined benefit and defined contribution plans.

Until and including 2013, all employees have been members of a defined benefit plan for salaries up to 12 times the basic amount for the national insurance (G). Defined benefit pension plans give the employees the right to determined future pension benefits. The obligation is an estimate of future benefits earned by the employees, based on the number of service years and the salary level at the age of retirement. The benefits are disounted to present value, and the recognised obligation is reduced by the fair value of the pension funds for funds based pension schemes. Changes in assumptions, the total number of members and deviations between estimated and actual salary increases and return on funds result in actuarial gains and losses. Such gains and losses are recognised in total comprehensive income. The defined benefit scheme was terminated at year-end, and paid-up policies have been issued in 2014. The effect of the change in plan was recognised in the income statement in 2013. From January 2014, all employees will be members of a contribution scheme for salaries below 12 G.

For salaries exceeding 12 G, Ferd has established a pension scheme implying that the employees earn a pension right each year. The scheme was closed for new hires when established. The right comprises a share of the salary in excess of 12 G together with a return component depending on the employee's chosen risk profile. The pension plan has many similarities with a contribution scheme, but as Ferd is not making current payments to a fund, but has elected to take the risk of return itself, the scheme shall be classified as a benefit scheme for accounting purposes. Ferd has recognised the obligation as a pension liabiity and is expensing the current deposits and the current return as incurred. The liability has not been discounted.

In addition, Group management has an early retirement pension scheme giving them the opportunity to retire at 65 years. This is also a benefit scheme.

Financial assumptions at 31 December

Discount rate

Expected return from pension assets

Expected wage growth

Future expected pension regulation

Expected regulation of base amount (G)

DEFINED BENEFIT PLANS

Specification of the recognised liability

NOK 1 000

Present value of unfunded pension liabilities

Present value of wholly or partly funded pension obligations

Total present value of defined benefit obligations

Fair value of pension assets

Total defined benefit obligation recognised in the balance sheet

Movement in the liability for defined benefit pension plans

NOK 1 000

Liability for defined benefit pension plans at 1 January

Present value of the pension earnings of the year

Interest expense on the pension liability

Estimate deviation on the pension liability

Plan changes

Benefits paid

Liability for defined benefit pension plans at 31 December

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

NOK 1 000

Fair value of pension assets at 1 January

Expected return from pension assets

Estimate deviations on pension funds

Contribution from employer

Administration expenses

Benefits paid

Fair value of pension assets at 31 December

Pension asssets include the following:

NOK 1 000

Equity instruments

Government stock

Corporate stock

Other debt instruments, including structured debt

Property investments

Bank deposits

Total pension assets

Estimate deviation recognised in total comprehensive income

NOK 1 000

Estimate deviation on the pension obligation (benefit schemes) of the year

Estimate deviation of the pension funds (contribution schemes) of the year

Net estimate deviation for benefit schemes recognised in income statement

Pension costs recognised in the income statement

NOK 1 000

Present value of this year's pension earnings

Plan changes

Administration expenses

Total pension costs recognised in the income statement as salary expenses

Interest expense on the pension liability

Expected return on pension assets

Total pension costs recognised in the income statement as interest expenses