Notes to the Financial Statements
30. Post-employment benefits
The Company operates four defined benefit pension schemes and a defined contribution pension scheme. On 1 January 2005 the defined benefit schemes were closed to new entrants.
Defined Contribution Scheme
Employees joining the Company after 1 January 2005 are members of the defined contribution scheme. Contributions are paid by the members and by the Company at fixed rates. During the year the Company contributed €762k (2018: €591k) to the defined contribution scheme and this amount was charged to the Profit and Loss account. Irish Pensions Trust Limited, an independent professional trustee Company, is the sole trustee of the defined contribution scheme.
Defined Benefit Schemes
(a) The Company operates four defined benefit pension schemes based on final pensionable salaries for eligible employees, including employees and former employees of Dundalk Port Company and the Company’s predecessor entity, Dublin Port & Docks Board.
The four schemes are administered by trustees. The schemes are “The Dublin Port Superannuation Fund 1996”, “The Dublin Port Company Pilots Superannuation Fund”, “The Dublin Port Company Chief Executive Retirement Benefits Scheme” and “The Dublin Port Company Pension Scheme for Former Employees of Dundalk Port Company”.
The Company and scheme members appoint the trustees of the Dublin Port Superannuation Fund 1996. The most recent member trustee election for the Dublin Port Superannuation fund 1996 was held in 2017 and the appointment of four candidates was ratified by the Board at its meeting on 8 December 2017. In addition to the four member trustees, the Company also appointed a further four trustees.
Irish Pensions Trust Limited, an independent professional trustee Company, is the sole trustee of the other three Schemes.
There are no unfunded schemes in place as at 31 December 2019.
(b) Actuarial Valuation
The funding position of the four defined benefit schemes is assessed in accordance with the advice of independent actuaries. The funding position is formally assessed at three yearly intervals.
The Company intends to make regular contributions to the four schemes in accordance with the recommendations set out by the actuaries in the relevant actuarial reports for each scheme.
The most recent applicable actuarial valuation reports for the main defined benefit schemes were prepared at 1 January 2018. The reports were completed by Mercer, who are neither officers nor employees of the Company. The valuation reports at 1 January 2018 are available for inspection by scheme members but not for public inspection.
The next valuation reports for these schemes are due to be prepared as at 1 January 2021.
Minimum Funding Standard valuation basis (unaudited information):
The four defined benefit schemes are required to meet the Minimum Funding Standard (MFS) in accordance with Section 44 of the Pensions Act, 1990 (as amended). The MFS, in general terms, measures whether accumulated assets cover liabilities accrued to members, assuming the schemes were wound up at the valuation date. The assumptions on which the MFS liability is determined are prescribed in legislation and actuarial guidance. The most recently completed actuarial funding certificates for the main defined benefit schemes were submitted to the Pensions Authority with an effective date of 31 December 2018 and confirmed that the schemes satisfied the MFS at that date.
Following the actuarial review at 1 January 2020, it was found that four defined benefit schemes would have met the MFS as at 1 January 2020. Overall assets of the schemes were €281.5m and overall liabilities under the MFS were €197.3, resulting in an aggregate surplus of €84.2m on the MFS basis.
Long-term valuation basis (unaudited information):
The Company’s intention is to continue to provide funding in accordance with the actuary’s recommendation to ensure that the schemes continue to operate and provide for pension payments in the long term future.
The valuations at 1 January 2018 for such funding purposes were prepared using an actuarial valuation method known as the “attained age” method. The principal actuarial assumptions adopted in the valuation were that the annual rate of return on investments before retirement would be 1.00% per annum, the annual rate of return on investments after retirement would be 1.00% per annum, the increase in salaries would be 2.50% for 2018-2022 and 3.0% per annum thereafter; the increase in pensions in payment would be 1.75% per annum. Under this valuation method at 1 January 2018, overall assets were €281.8m and overall accrued liabilities were €264.9m. This resulted in an aggregate surplus of €16.9m and a funding ratio (assets: liabilities) as at 1 January 2018 of 106%.
Following an interim actuarial review at 1 January 2020 overall assets were €281.5m and overall liabilities measured under this valuation method were €269.1m resulting in an aggregate surplus of €12.4m and a funding ratio (assets:liabilities) as at 1 January 2020 of 105%.
The next formal valuations will be prepared at 1 January 2021.
(c) FRS 102 – Section 28 – “Employee Benefits”
The defined benefit obligations of the Company have been valued by independent actuaries for the purposes of section 28 of FRS 102 based on data provided for an actuarial valuation of the schemes as at 31 December 2019. As required by section 28 of FRS 102 the valuation was prepared using an actuarial valuation method known as the “projected unit credit” method. As the schemes are closed to new entrants, the schemes have an age profile that is rising and therefore under the projected unit method the current service cost will increase as members of the scheme approach retirement.
Financial Assumptions:
The main financial assumptions to calculate the benefit obligations (liabilities) under section 28 of FRS 102 at the Balance Sheet date were:
31 December 2019 | 31 December 2018 | |
|---|---|---|
Rate of interest applied to discount benefit obligations | 1.25% | 2.00% |
Projected rate of increase of salaries | 2.5% for 2020-2022, 3% thereafter | 2.5% for 2019-2022, 3% thereafter |
Projected rate of increase of pensions in payment | 1.50% | 1.75% |
Rate of increase of pensions in deferment | 1.50% | 1.75% |
CPI Inflation | 1.50% | 1.75% |
The discount rate used in the calculation of the pension liability is determined by reference to market yields at the Balance Sheet date on high quality corporate bonds. The currency and term of the corporate bonds is consistent with the currency and estimated term of the benefit obligations. Having regard to the duration of the scheme benefit obligations, a discount rate of 1.25% was adopted at 31 December 2019.
Demographic Assumptions:
The assumptions relating to the life expectancy at retirement for members is set out below:
2019 | 2018 | |||
|---|---|---|---|---|
Male Years | Female Years | Male Years | Female Years | |
Current members age 40 (life expectancy at age 65) | 24.7 | 26.5 | 24.6 | 26.5 |
Current pensioners age 65 (life expectancy at age 65) | 22.5 | 24.4 | 22.4 | 24.3 |
Scheme Assets:
The investment allocations of assets at the Balance Sheet date were:
Asset Class | Proportion of Scheme assets at 31 December 2019 | Proportion of Scheme assets at 31 December 2018 |
|---|---|---|
Bonds | 91.23% | 90.93% |
Property | 0.03% | 0.13% |
Other | 8.74% | 8.94% |
100.0% | 100.0% |
Under FRS102, the expected return on assets is set equal to the discount rate.
The fair value of the assets in the pension schemes at the Balance Sheet date were:
Fair value at 31 December 2019 | Fair value at 31 December 2018 | |
|---|---|---|
€’000 | €’000 | |
Bonds | 256,854 | 249,258 |
Property | 90 | 363 |
Other | 24,591 | 24,503 |
Total Fair value of Assets | 281,535 | 274,124 |
The amounts recognised in the statement of financial position are as follows:
31 December 2019 | 31 December 2018 | |
|---|---|---|
€’000 | €’000 | |
Fair value of scheme assets | 281,535 | 274,124 |
Defined benefit obligation | (233,491) | (220,943) |
Defined benefit asset | 48,044 | 53,181 |
Presented in financial statements as follows: | ||
Investments – surplus on funded schemes (see note 16) | 48,044 | 53,181 |
Analysis of the amounts included in the Profit and Loss Account:
2019 | 2018 | |
|---|---|---|
€’000 | €’000 | |
Cost (excluding interest) | ||
Current service cost | (1,204) | (1,275) |
Net interest cost | ||
Interest income on scheme assets | 5,394 | 5,273 |
Interest on pension scheme benefit obligations | (4,325) | (4,304) |
Net interest income | 1,069 | 969 |
(135) | (306) |
The Profit and Loss charge includes the following cost/credit due to changes in plan provisions:
Analysis of the re-measurements amounts recognised in other Comprehensive Income:
2019 | 2018 | |
|---|---|---|
€’000 | €’000 | |
Return on plan assets (excluding interest income) | 10,863 | (4,389) |
Effect of experience adjustments | 1,565 | 3,515 |
Effect of changes in assumptions | (17,640) | 3,251 |
Total re-measurements included in other Comprehensive Income | (5,212) | 2,377 |
Movement in scheme assets and benefit obligations
Assets €’000 | Benefit obligations €’000 | Net (deficit)/surplus €’000 | |
|---|---|---|---|
At 31 December 2017 | 281,804 | (231,217) | 50,587 |
Current service cost | - | (1,275) | (1,275) |
Past service credit | - | - | - |
Interest on scheme benefit obligations | - | (4,304) | (4,304) |
Interest income on scheme assets | 5,273 | - | 5,273 |
Return on scheme assets (excluding interest income) | (4,389) | - | (4,389) |
Re-measurement due to experience adjustments | - | 3,515 | 3,515 |
Re-measurement due to change in assumptions | - | 3,251 | 3,251 |
Members’ contributions | 310 | (310) | - |
Benefits paid from scheme | (9,397) | 9,397 | - |
Employer contributions | 523 | - | 523 |
As at 31 December 2018 | 274,124 | (220,943) | 53,181 |
Movement in scheme assets and benefit obligations
Assets €’000 | Benefit obligations €’000 | Net (deficit)/surplus €’000 | |
|---|---|---|---|
At 31 December 2018 | 274,124 | (220,943) | 53,181 |
Current service cost | - | (1,204) | (1,204) |
Past service credit | - | - | - |
Interest on scheme benefit obligations | - | (4,325) | (4,325) |
Interest income on scheme assets | 5,394 | - | 5,394 |
Return on scheme assets (excluding interest income) | 10,863 | - | 10,863 |
Re-measurement due to experience adjustments | - | 1,565 | 1,565 |
Re-measurement due to change in assumptions | - | (17,640) | (17,640) |
Members’ contributions | 304 | (304) | - |
Benefits paid from scheme | (9,360) | 9,360 | - |
Employer contributions | 210 | - | 210 |
As at 31 December 2019 | 281,535 | (233,491) | 48,044 |
The employer expects to contribute €0.2 million to the pension schemes in 2020.
Sensitivity Analysis of Scheme Benefit obligations:
The sensitivity of the defined benefit obligation to changes in the mortality assumptions is set out below:
2019 Existing Assumption | 2019 -1 Year | 2019 +1 Year | |
|---|---|---|---|
Current Male Member age 40 (Life Expectancy at age 65) | 24.6 | 23.8 | 25.5 |
Current Male Pensioner age 65 (Life Expectancy at age 65) | 22.4 | 21.5 | 23.2 |
Benefit obligations (€’000) | 233,491 | 225,566 | 241,529 |
Change in benefit obligations (€’000) | 7,925 | (8,038) | |
% Change (as % of original) | 3.4% | (3.4%) |
The sensitivity of the defined benefit obligation to changes in the discount rate is set out below:
2019 | 2019 | 2019 | |
|---|---|---|---|
Existing Assumption | -0.25% | +0.25% | |
Discount Rate | 1.25% | 1.00% | 1.50% |
Benefit obligations (€’000) | 233,491 | 241,889 | 224,302 |
Change in benefit obligations (€’000) | (8,398) | 9,189 | |
% Change (as % of original) | (3.6%) | 3.9% |