Arla Foods Consolidated Annual Report 2021
107
Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Funding
4.7 PENSION LIABILITIES
Contents
III
NET PENSION LIABILITIES DOWN EUR 31 MILLION FROM PREVIOUS YEAR
The group's pension assets and liabilities consist primarily
of defined benefit plans in Sweden and the UK.
The group also operates defined contribution plans for
employees. For these defined contribution plans, the
group is not subject to the same investment, interest
rate, inflation or longevity risks as it is for the defined
benefit plans. The benefits that employees receive
are dependent on the contribution paid, investment
returns, and the form of benefit chosen at retirement.
Pension plans in Sweden
The recognised net pension liability in Sweden was
EUR 225 million at 31 December 2021, an increase of
EUR 4 million compared to the previous year.
The defined benefit plan does not currently require the
group to make further cash contributions. These
pension plans are contribution-based plans, guaranteeing
a defined benefit pension at retirement. The plan assets
are legally structured as a trust, and the group has
control over the operation of the plan and the
associated investments.
These pension plans do not include a risk-sharing
element between the group and the plan participants.
Pension plans in the UK
The recognised net pension asset in the UK was
EUR 69 million at 31 December 2021, an increase of
EUR 29 million compared to the previous year. The
increase can mainly be attributed to contributions to
the plan by Arla of EUR 17 million during the year and
actuarial gains of EUR 54 million, offset by a reduction
in the fair value of plan assets of EUR 46 million.
The defined benefit plan in the UK is a defined benefit
final salary scheme. The plan is closed to both new
entrants and future accruals. The plan is a registered
pension scheme, and the assets are held in legally
separate, trustee-administered funds. The trustees
of the plan are required by law to act in the best
interests of the plan participants while at the same time
administering the plan in accordance with the purpose
for which the trust was created, and is responsible for
drawing up the investment, funding and governance
policies. A representative of the group attends trustee
meetings to provide the group's view on the investment
strategy, but the ultimate power lies with the trustees.
During the reporting period, the trustees of the plan
entered into a buy-in policy with Aviva Life & Pensions
UK Limited that provides insurance for 25 per cent
of the pension liabilities. According to the policy,
payments that are exactly equal to the benefits paid
to the insured population, are made to the plan. This
has removed all investment, interest rate, inflation and
longevity risks in respect of these members. The value
of the annuity policy is determined using the disclosed
assumptions used for valuing the liabilities and is equal
to the accounting liabilities of the insured pensioner
population.
Employer contributions are determined based on the
advice of independent qualified actuary on the basis
of triennial valuation negotiations between the plan
and Arla and ultimately approved by HRM Pensions
Regulator. The next triennial valuation will be carried
out as at 31 December 2023. The most recent full
actuarial valuation of the plan was carried out as at
31 December 2019. The valuation indicated that,
on the agreed funding basis, the plan had a deficit of
GBP 22 million. To meet this deficit, the group agreed
to pay annual contributions of GBP 13 million until
March 2021. The next valuation will be carried out as
at 31 December 2022.
The results of the 2019 actuarial valuation have been
used and updated for IAS19 'Employee benefits'
purposes by a qualified independent actuary. The plan
exposes the group to inflation risk, interest rate risk and
market investment risk, as well as longevity risk.
Defined contribution plans are in place for other
employees. Contributions are made both by Arla and
the employee at a rate determined by Arla.
Table 4.7.a Pension liabilities recognised in the balance sheet
(EURM)
2021
Sweden
UK
KC
Other
Total
Present value of funded liabilities
235
1,473
44
1,752
-13
-1,542
-26
-1,581
Deficit of funded plans
222
-69
18
171
Present value of unfunded liabilities
3
2
5
Net pension liabilities recognised in the balance sheet
225
-69
20
176
Fair value of plan assets
Specification of total liabilities:
Present value of funded liabilities
Present value of unfunded liabilities.
Total liabilities
Presented as:
Pension assets
Pension liabilities
Net pension liabilities
2020
Present value of funded liabilities
Fair value of plan assets
Deficit of funded plans
235
1,473
44
1,752
3
2
5
238
1,473
46
1,757
-69
-69
225
20
245
225
-69
20
176
231
1,456
49
-13
-1,496
-29
218
-40
22
1,736
-1,538
20
198
Present value of unfunded liabilities
3
6
9
Net pension liabilities recognised in the balance sheet
221
-40
26
207
Specification of total liabilities:
Present value of funded liabilities
Present value of unfunded liabilities
Total liabilities
Presented as:
Pension assets
Pension liabilities
Net pension liabilities
231
1,456
49
1,736
3
6
9
234
1,456
55
1,745
-40
-40
221
26
247
221
-40
26
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