2014 Annual report - Statement of financial position

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NOTE 19	PENSION COSTS AND LIABILITIES

THE GROUP'S PENSION PLANS
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.

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 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.

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 services 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 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).
Economic assumptions in Norwegian companies at 31 December
			2014	2013
Discount rate			2,70%	3,30%
Expected wage growth			3,25%	3,75%
Future expected pension regulation			1,75%	1,75%
Expected regulation of base amount (G)			3,00%	3,50%

Interval for economic assumptions in foreign companies at 31 December
			2014	2013
Discount rate			1.1 - 4.52	2.00 - 4.10
Expected wage growth			0.00 - 3.75	0.00 - 1.00
Future expected pension regulation			0.00 - 1.75	0.00 - 0,60

PENSION OBLIGATIONS
Reconciliation of net liability against balance sheet
NOK 1 000			2014	2013
Pension liabilities for defined benefit pension plans			- 169 417	- 146 973
Pension assets for defined benefit pension plans			17 391	9 805
Total defined benefit obligation recognised in the consolidated statement of financial position			- 152 026	- 137 168

DEFINED BENEFIT PLANS
Specification of recognised liability
NOK 1 000			2014	2013
Present value of unfunded pension liabilities			- 56 988	- 51 737
Present value of wholly or partly funded obligations			- 556 128	- 617 516
Total present value of defined benefit obligations			- 613 116	- 669 253
Fair value of pension assets			461 090	532 085
Total defined benefit obligation recognised in the consolidated statement of financial position			- 152 026	- 137 168

Movements in liabilities for defined benefit pension plans
NOK 1 000			2014	2013
Liability for defined benefit pension plans at 1 January			669 253	539 091
Present value of current service cost			17 655	25 031
Interest expenses on the pension liability			17 359	23 286
Demographic estimate deviation on the pension liability			3 214	28 063
Financial estimate deviation on the pension liability			70 510	- 40 622
Settlement of pension plans			- 200 726	- 42 097
Curtailment of pension plans			- 15 612	- 48 907
Change in liability due to acquisition/sale of subsidiaries			9 167	191 228
Benefits paid			- 22 416	- 40 255
Social security tax			73	1 148
Exchange differences on foreign plans			64 639	33 287
Liability for defined benefit pension plans at 31 December			613 116	669 253

Expected payments of defined pension liabilities
NOK 1 000			2014
Defined benefit pension expected to fall due year 1-5			203 581
Defined benefit pension expected to fall due year 6-10			201 686
Defined benefit pension expected to fall due year 11-20			198 957
Defined benefit pension expected to fall due year 21-30			8 892
Total benefit pension due			613 116

Movement in fair value of pension assets for defined benefit pension plans
NOK 1 000			2014	2013
Fair value of pension assets at 1 January			532 085	337 068
Expected return from pension assets			13 317	15 976
Financial estimate deviation on the pension assets			19 034	26 251
Contributions from employer			10 285	34 826
Administration expenses			- 1 604	- 1 681
Contributions from employees			1 320
Increase in pension funds due to the acquisition of subsidiaries			8 297	157 744
Settlements			- 154 268	- 32 021
Benefits paid			- 18 535	- 34 896
Exchange difference on foreign plans			51 159	28 818
Fair value of pension assets at 31 December			461 090	532 085

Pension assets include the following
NOK 1 000		Of which active market:	2014	2013
Equity instruments		95 461	96 343	100 459
Government stock		211 195	271 396	180 650
Corporate stock		4 915	58 276	78 653
Other debt instruments, including structured debt		361	4 279	57 814
Property investments		1 415	24 102	35 899
Bank deposits			1 602	21 415
Other assets		1 692	5 092	57 195
Total pension funds		315 039	461 090	532 085

Actuarial deviations recognised in comprehensive income
NOK 1 000			2014	2013
Current year actuarial deviation on pension liabilities (defined benefit schemes)			- 73 724	12 559
Current year actuarial deviation on pension funds (defined benefit schemes)			19 034	26 251
Tax effect (note 9)			2 098	- 3 627
Net actuarial deviation on defined benefit schemes			- 52 592	35 183

PENSION COSTS
NOK 1 000			2014	2013
Defined benefit plans			- 28 071	- 24 824
Defined contribution plans			131 120	100 442
Total pension costs recognised in current year payroll costs			103 049	75 618

DEFINED BENEFIT PLAN PENSION COSTS
Pension costs recognised in income statement
NOK 1 000			2014	2013
Present value of this year's pension earned			17 655	25 031
Contribution from employees			- 1 320
Curtailment of pension schemes and plan changes			- 46 083	- 52 684
Social security tax			73	1 148
Administration costs			1 604	1 681
Total pension costs frm benefit schemes recognised in salary costs			- 28 071	- 24 824

Interest expense on the pension liability			17 359	23 286
Expected return on pension funds			- 13 317	- 15 976
Total pension costs from benefit schemes recognised in finance costs			4 042	7 310