ANNUAL REPORT AND FINANCIAL STATEMENTS 2012 | 79
23. Provisions continued
Long-term sickness The Group has long-term sickness insurance arrangements which cover the cost of absence from work of all current employees. However, the cost of employees who went on long-term absence prior to these arrangements being established are self-insured by the Group. The provision represents the expected present value of income protection payments due to these individuals.
This provision has been quantified on the assumption that all employees currently on long-term sick leave do not return to the employment of the Group. The discount rate and salary growth assumptions used in each year are identical to those used for the purposes of determining UK defined benefit pension obligations.
Guaranteed product The provision for the guaranteed product represented the actuarially assessed cost of meeting potential obligations under certain investment products which have a guaranteed payout in the event of death of the investor. The underlying investment plan was closed to new investors during 2004 and insurance arrangements are now in place to cover any exposure to the Group. The remaining provision of £0.4m was therefore released during 2012.
Long-term service award This provision represents the obligation in respect of long-term service benefits to which some employees are entitled, including incremental holiday entitlement and long-term service awards.
F&C Partners litigation In June 2012, following a successful outcome from the Court of Appeal regarding the level of costs and interest to be borne by F&C in respect of the F&C Partners litigation, a full and final payment of £0.65m was paid to the founder partners. As a result, the excess provision of £1.35m was released during the year.
Further details of this litigation were disclosed in the Annual Report and Financial Statements for previous reporting periods.
24. Pension benefits The Group operates defined benefit schemes in the United Kingdom, The Netherlands, the Republic of Ireland and participates in one in Portugal. The UK scheme is closed to new entrants. All new UK employees are eligible to benefit from defined contribution arrangements, which provide greater certainty over the future cost to the Group.
A former Chairman of the Group, Mr R W Jenkins, has a pension entitlement which commenced in January 2011 and is adjusted in line with the Retail Price Index on 1 January in each year. The annual entitlement as at 1 January 2012 was £125,000. The Group has not earmarked any assets to date with respect to this liability.
The net pension deficit is recognised under non-current liabilities in the Statement of Financial Position and is stated gross of the related deferred tax asset.
The results of the latest full actuarial valuations were updated at 31 December 2012 by qualified independent actuaries. The pension deficits of the Group are summarised in aggregate and by scheme as follows:
31 December 31 December 2012
Aggregate
Fair value of plan assets Benefit obligations
Total pension deficit By scheme
F&C Asset Management Pension Plan (FCAM Plan) F&C Netherlands pension plan F&C Ireland pension plan F&C Portugal pension plan R W Jenkins pension
Total pension deficit Note
24(d) 24(d)
24(d) £m 232.7
(256.8) (24.1)
2011 £m
215.9
(236.4) (20.5)
31 December 31 December 2012 £m
(10.8) (9.4) (0.5) –
(3.4) (24.1)
2011 £m
(10.3) (6.6) (0.4) –
(3.2) (20.5)
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