Arla Foods Consolidated Annual Report 2021
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Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Funding
4.7 PENSION LIABILITIES
Plan asset investment
Plan assets generate returns that are used to satisfy
the plan liabilities. They are not necessarily intended
to be realised in the short term. The trustees invest
in different categories of assets and with different
allocations among those categories, according to the
plan investment principles.
Currently, the plan investment strategy is to maintain
a balance of growth assets (equities, property and
infrastructure), income assets (comprising credit
investments and corporate bonds) and matching assets
(comprising a liability hedge portfolio and a buy-in
annuity policy), with a weighting towards matching
assets. There are no direct investments in the group.
Part of the investment objective is to minimise
fluctuations in the plan's funding levels due to changes
in the value of the liabilities. This is primarily achieved
using a Liability Driven Investment (LDI) portfolio, the
main goal of which is to align movements in the value
of the assets with movements in the liabilities caused
by changes in market conditions. The plan has hedging
that covers the majority of interest rate and inflation
movements, as measured based on the trustees'
funding assumptions which use a discount rate derived
from gilt yields.
LDI primarily involves the use of government bonds.
Derivatives such as interest rate and inflation swaps are
also used. There are no annuities or longevity swaps in
the LDI portfolios. The value of the LDI assets is
determined based on the latest market bid price for the
underlying investments, which are traded daily on liquid
markets.
Table 4.7.e Assumptions for the actuarial calculations
Discount rate assumptions
Discount rate, Sweden
Discount rate, UK
Inflation assumptions
Inflation (CPI), Sweden
Inflation (CPI), UK
Mortality assumptions
Life expectancy at age 65 for a:
Male in the UK
Female in the UK
Male in Sweden
Female in Sweden
Table 4.7.f Sensitivity of pension liabilities to key assumptions
(EURM)
Impact on pension liabilities at 31 December
Discount rate +/- 10bps
Expected salary increases +/- 10bps
Life expectancy +/- 1 year
Inflation +/- 10 bps
Contents
III
2021
2020
%
%
1.7
1.3
1.9
1.4
2.1
1.5
2.7
2.1
21.0
20.9
23.0
23.0
22.0
22.0
24.0
24.0
2021
2021
2020
2020
+
+
-26
26
-28
28
2
-2
3
-3
82
-82
84
-84
16
-16
17
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