75 Finsbury Food Group Annual Report & Accounts 2018


Notes to the Consolidated Financial Statements


13. Pension Schemes (continued)


The financial assumptions are based on market conditions as at the review date of 30 June 2018 with discount rates based on the yields on long-dated high quality corporate bonds. The discount rate remains at the same level as the discount rate used last year. The rate of return for plan assets is the long-term rate that reflects the yield on high quality corporate bonds as required under changes to IAS 19. The rate of return is effectively based on the discount rate with no allowance made for any outperformance expected from the scheme’s actual asset holding. The actual return on the scheme’s assets, net of expenses, over the year to the review date was around -1.3% (2017: 6.9%), the negative return that occurred in the current year was impacted by the uncertainty and volatility in equity markets.


Changing the year end 2018 assumptions to those of 2017 year end listed on the previous page, the deficit would have been £11,143,000 compared to the reported deficit of £10,536,000.


2018 Pre-retirement mortality assumption Post-retirement mortality assumption S2NA year of birth tables with CMI 2015


projections and 1.25% pa long-term rate of improvement


S2NA year of birth tables with CMI 2015


projections and 1.25% pa long-term rate of improvement


Under the mortality tables adopted, the assumed future life expectancy at age 65 is as follows: 2018


Male currently at age 45 Female currently at age 45 Male currently at age 65 Female currently at age 65


24.3 26.6 22.6 24.7


2017


24.2 26.5 22.5 24.6


Sensitivity Analysis The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises changes in these assumptions and their approximate (decrease)/increase in liabilities.


2018


Discount rate plus 0.5% Discount rate minus 0.5% Inflation plus 0.5% Inflation minus 0.5%


Life expectancy plus 1.0 years Life expectancy minus 1.0 years


(£2.6 million) £2.9 million £3.0 million (£2.9 million) £0.7 million (£0.7 million)


The above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the same. The weighted average duration of the defined benefit obligation is around 18 years.


Risk Mitigation Strategies Whilst the scheme does not explicitly hold risk mitigation strategies such as swaps, annuities or liability driven investments, the investment strategy is dominated by diversified growth funds which are intended to reduce the investment risk through diversification.


Effect of the Scheme on the Company’s Future Cashflows The Company is required to agree a Schedule of contributions with the Trustees of the scheme following a valuation which must be carried out at least once every three years. The next valuation of the scheme is due as at 31 December 2018. In the event that the valuation reveals a larger deficit than expected the Company may be required to increase contributions above those set out in the existing Schedule of Contributions. Conversely, if the position is better than expected contributions may be reduced. The total cash cost to the Company for the current financial year is £454,000, this includes deficit recovery contributions, pension protection fund levy fees and cost of advisors. The Company expects to pay deficit recovery contributions of £200,000 in the year to 29 June 2019. The projected net interest charge to the Consolidated Statement of Profit and Loss for the year to 29 June 2019 is £281,000. This projection assumes cashflows to and from the scheme are broadly unchanged from the current year figures and that there will be no events that would give rise to a settlement/curtailment/past service cost.


2017 S2NA year of birth tables with CMI 2015


projections and 1.25% pa long-term rate of improvement


S2NA year of birth tables with CMI 2015


projections and 1.25% pa long-term rate of improvement


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