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JOTUN A/S
3 PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS
Jotun A/S 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 plans, the company is responsible
for paying a pension to the employee based on 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
amount 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.
DEFINED BENEFIT PLANS
Defined benefit plans comprise arrangements whereby the
company is responsible for paying a future pension to the
employees based on pensionable salary at the time the
employee retires.
In Jotun A/S the defined benefit schemes were replaced by
defined contribution plans in 2004. Net pension obligations
as of 31 December 2017, are primarily related to previous
early retirement schemes for Jotun Group’s senior executives.
In addition, there are pension obligations related to old-age
pensions and pension plans for employees who earn more than
twelve times the social security basic amount (12G).
OTHER SEVERANCE SCHEMES
Included in this schemes are Jotun’s operating pension schemes
for employees with an annual base salary and pension base
exceeding 12 times the social security basic amount (12G).
ASSUMPTIONS RELATING TO THE DEFINED BENEFIT PLANS
The discount rate related to the defined benefit plans is based
on the market yields on 10-year government bonds adjusted for
actual lifetime of the pension liabilities.
As a rule, parameters such as wage growth, growth in G and
inflation are set in accordance with recommendations in Norway.
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 expected
return will vary depending on the composition of the various
classes of assets. The expected return and breakdown of pension
plan assets may be seen in the tables below.
BREAKDOWN OF PENSION PLAN ASSETS (FAIR VALUE) AT 31 DECEMBER 2017 2016
Cash and cash equivalents, in % 3 2
Bonds, in % 71 74
Shares, in % 13 10
Property, in % 14 14
Total 100 100
ACTUARIAL ASSUMPTIONS
Discount rate, in % 1.90 1.40
Expected return, in % 1.90 1.40
Wage adjustment, in % 2.50 2.25
Inflation / increase in social security basic amount (G), in % 2.50 2.25
Pension adjustment, in % 0.50 – 2.50 0.50 – 2.50
DEMOGRAPHIC DATA
Defined benefit scheme – pensioners 1 5
Old-age pensioners in unfunded schemes 17 14
Early-retirement-pension agreements – agreed and implemented 1 12
Senior-executive schemes – active employees 3 3
Senior-executive schemes – pensioners 4 5