In the prior year and for the period to 31 December 2018 the Group sponsored a defined benefit pension scheme in the Netherlands. This was a funded career average pay arrangement, where pensionable salary was subject to a cap and was financed through an insurance contract. The scheme ceased on 31 December 2018.
From 1 January 2019 the employee pension benefit in the Netherlands is being provided through contributions to a new defined contribution scheme and the Group's obligations under the previous pension arrangement ceased. Accordingly the Group ceased to recognise assets and liabilities in respect of the previous arrangement from 1 January 2019 and recognised a curtailment gain of £3.5 million through the income statement.
The other defined benefit pension arrangements operated by the Company are unfunded: Jubilee awards of £0.1 million (2018: £0.1 million) for employees in the Netherlands are recognised within other payables in the Consolidated Statement of Financial Position as at 30 June 2019.
The pension cost relating to the defined benefit pension arrangement in the Netherlands was assessed in accordance with the advice of an independent qualified actuary using the projected unit method.
The major actuarial assumptions used by the actuary were:
| 31 December 2018 | 30 June
2018 |
|---|
| Discount rate | 1.90% | 1.90% |
| Inflation assumption | 1.90% | 1.90% |
| Salary growth | 2.40% | 2.40% |
| Rate of increase in accrued pensions of active members | 0.34% | 0.34% |
| Rate of increase in pensions in payment | 0.00% | 0.00% |
| Rate of increase in pensions in deferment | 0.00% | 0.00% |
In valuing the liabilities of the pension scheme at 31 December 2018 and 30 June 2018, mortality assumptions were made as indicated below.
The mortality assumption follows the Prognosetafel AG2016 (2018: Prognosetafel AG2016) mortality tables with an experience adjustment in line with the ES-P2 tables as published by the Dutch Alliance of Insurers.
| Assumed life expectations on retirement age | Male | Female |
|---|
| Retiring today (age 68) | 18.7 | 20.6 |
| Retiring in 20 years (age 48) | 20.8 | 22.7 |
The assumptions used by the Group are the best estimates chosen by the Directors from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.
| 2019
£m | 2018
£m |
|---|
| Present value of funded defined benefit obligations | – | (20.3) |
| Fair value of scheme assets | – | 17.3 |
| Net pension scheme deficit | – | (3.0) |
Movements in Present Value of Defined Benefit Obligations
| 2019
£m | 2018
£m |
|---|
| Defined benefit obligation at beginning of the period | 20.3 | 17.9 |
| Service cost | 0.6 | 1.2 |
| Interest cost | 0.2 | 0.4 |
| Employee contributions | 0.1 | 0.2 |
| Benefits paid | – | – |
| Remeasurements: | | |
| – Loss from change in financial assumptions | 0.1 | 0.6 |
| – Gain from change in demographic assumptions | (0.3) | – |
| – Experience losses | – | 0.6 |
| Settlement | (17.5) | – |
| Curtailment | (3.5) | (0.6) |
| Foreign exchange difference on translation | – | – |
| Defined benefit obligations at end of the period | – | 20.3 |
Movements in Fair Value of Scheme Assets
| 2019
£m | 2018
£m |
|---|
| Fair value of scheme assets at beginning of the period | 17.3 | 14.9 |
| Interest income | 0.2 | 0.3 |
| Additional charges | (0.1) | (0.1) |
| Employer contributions | 0.3 | 0.7 |
| Employee contributions | 0.1 | 0.2 |
| Benefits paid | – | – |
| Remeasurements: | | |
| – Premium adjustment | 0.1 | 0.3 |
| – Return on plan assets | (0.3) | 0.9 |
| Settlement | (17.5) | – |
| Foreign exchange difference on translation | (0.1) | 0.1 |
| Fair value of scheme assets at end of the period | – | 17.3 |
Analysis of the Amount (Credited)/Charged to the Income Statement
| 2019
£m | 2018
£m |
|---|
| Service cost | 0.6 | 1.2 |
| Net interest cost | – | 0.1 |
| Gain on curtailment of pension scheme | (3.5) | (0.6) |
| Additional charges | 0.1 | 0.1 |
| Net pension (credit)/expense | (2.8) | 0.8 |
Cumulative Analysis of the Amount Charged to the Other Statement of Consolidated Income
| 2019
£m | 2018
£m |
|---|
| Amounts charged in previous periods | 0.5 | 0.5 |
| Actuarial (gain)/loss on defined benefit pension scheme | – | – |
| Net pension expense | 0.5 | 0.5 |
Scheme Assets
The Group's defined benefit pension scheme in the Netherlands was financed through an insurance contract. Under this contract, a market price for the assets in respect of this insurance contract was not available. In accordance with IAS 19 for such insurance policies, an asset value was calculated by discounting expected future cash flows. The discount rate used for this calculation reflected the risk associated with the scheme assets and the maturity or expected disposal date of those assets.
The fair value of the scheme's assets was as follows:
| 2019
£m | 2018
£m |
|---|
| Total fair value of assets | – | 17.3 |
| Actual return on scheme assets | – | 1.5 |
| Discount rate used to value assets | – | 1.90% |
The long term rate of return on pension plan assets was determined by aggregating the expected return for each asset class over the strategic asset allocation as at the year end. This rate of return was then adjusted for any expected profit sharing based on market related returns on notional loans.
History of Amounts in the Current Period
| 2019
£m | 2018
£m | 2017
£m | 2016
£m | 2015
£m |
|---|
| Present value of funded defined benefit obligations | – | (20.3) | (17.9) | (17.4) | (7.2) |
| Fair value of scheme assets | – | 17.3 | 14.9 | 13.6 | 5.9 |
| Deficit in the scheme | – | (3.0) | (3.0) | (3.8) | (1.3) |