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Jotun Annual Report 2014

52 JOTUN A/S Note 3 PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS The company has both defined contribution and defined benefit pension plans. In the defined contribution plans, the cost is equal to the contributions to the employees’ pension savings in the accounting period. The future pension will be determined by the amount of the contributions and the return on the pension savings. In the defined benefit plan, the company is responsible for paying an agreed pension to the employee based on his or her pensionable salary. The cost for the accounting periods shows the employees’ pension entitlement of the agreed future pensions in the accounting year. Defined contribution plans Defined contribution plans comprise arrangements whereby the company makes annual contributions to the employees’ pension plans, and where the future pension is determined by the accounts of the contributions and the return on the pension plan assets. Employees in Jotun A/S are mainly covered by pension plans that are classified as contribution plans. Costs associated with defined contribution plans are specified in note 2 Payroll expenses. Defined benefit plans The company has pension plans that are classified as funded benefit plans and unfunded benefit plans, recognised in the statement of financial position. The schemes define a pension benefit of up to 60 per cent of final salary at retirement, limited up to twelve times the social security basic amount (G). As of 31 December the basis amount (1G) is NOK 88 370. The pension liability of the company is linked to changes in Norwegian social security benefits. Other schemes with net pension obligations include the contractual-pension scheme (AFP) and end financing of old AFP scheme(early retirement). In addition comes unfunded pension obligations related to old-age pensions, early retirement for Jotun’s senior executives and book liabilities related to contribution-based plans for employees who earn more than twelve times the social security basic amount (G). Other severance schemes Included in this scheme are Jotun’s operating pension schemes in the Norwegian companies regarding a pension base exceeding 12 times the basic amount (G). Assumptions relating to the defined benefit plans For the company, the market yields on government bonds are used, adjusted for actual lifetime of the pension liabilities. Parameters such as wage growth, growth in G and inflation deviates from the latest recommendations in Norway. The differences between the parameters used and the recommenda-tions will not have significant impact on the pension liabilities. The mortality estimate is based on an up-to-date mortality table (K2013BE). Accounting of actuarial losses and gains All actuarial losses and gains related to pensions are presented under other comprehensive income in the income statement. Pension plan assets Pension plan assets are mainly in bonds and shares. The estimated return will vary depending on the composition of the various class of assets. The actual return and breakdown of pension plan assets may be seen in the notes below. The number of active and pensioners in the various schemes is shown in the table below: Breakdown of pension plan assets (fair value) as of 31 December 2014 2013 Cash and cash equivalents in % 4 2 Bonds in % 53 52 Shares in % 34 34 Property in % 9 12 Total pension plan assets in % 100 100 Actuarial assumptions 2014 2013 Discount rate in % 2.70 3.30 Expected return in % 2.70 3.30 Wage adjustment in % 3.00-3.75 3.00-3.75 Inflation / increase in social security basic amount (G), in % 3.00 3.50 Pension adjustment in % 2.00-3.25 0.50-3.75 Schemes with net pension funds Defined benefit scheme - active - 17 Defined benefit scheme - pensioners - 11 Schemes with net pension obligations Old-age pensioners in unfunded schemes 14 14 Early-retirement-pension agreements - agreed and implemented 33 48 Senior-executive schemes - active 7 7 Senior-executive schemes - pensioners 1 2 Contractual pension (AFP) - pensioners 8 24 Benefit scheme financed over operations - 5


Jotun Annual Report 2014
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