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period over which the obligation is to be settled. The
expectation used for 2010 was 8.0% (2009: 8.25%) for the
US plans.
Assumptions regarding future mortality are based on
published statistics and the RP-2000 Combined Healthy
Mortality table. The valuation was prepared on a goingplan
basis. The valuation was based on members in
the Plan as of the valuation date and did not take future
members into account. No provision has been made
for contingent liabilities with respect to non-vested
terminated members who may be reemployed. No
provisions for future expenses were made.
Medical cost trend rates are not applicable to these plans.
The best estimate of contributions to be paid to the plans
for the year ending December 31, 2011 is $1,446.
European plans
LSM plans
The Company sponsors the LSM 2006 Pension Plan and
the LSM Additional Pension Plan, which are defined
benefit arrangements. LSM’s defined benefit pension
plans cover all eligible employees in the UK.
Benefits under these plans are based on years of service
and the employee’s compensation. Benefits are paid either
from plan assets or, in certain instances, directly by LSM.
Substantially all plan assets are invested in listed stocks
and bonds. The expected return on bonds is determined
by reference to UK long dated gilt and bond yields at the
reporting date. The expected rate of return on equities
have been determined by setting an appropriate risk
premium above gilt/bond yields having regard to market
conditions at the reporting date. The expected long-term
return on cash is equal to bank base rates at the
reporting date.
The expected long-term rates of return on plan assets are
as follows:
2010 2009
% per annum % per annum
Equities 8.50 9.60
Bonds 4.15–5.50 3.90–6.70
Cash 2.00 2.00
Other 3.90 3.90
Overall for LSM plans 6.30 7.41
The actual return on plan assets for the year ending
December 31, 2010 was 21.5% (2009: 13.3%) for the
primary and 4.1% (2009: 11.7%) for the additional defined
benefit plan.
114 Notes to Consolidated Financial Statements
Actuarial assumptions
2010 2009
% per annum % per annum
Inflation 3.50 3.60
Salary increases N/A N/A
Rate of discount at December 31
Allowance for pension in payment
increases of the Retail Prices
5.40 5.65
Index (“RPI”) or 5% p.a. if less
Allowance for revaluation of
deferred pensions of RPI or
3.40 3.50
5% p.a. if less
Allowance for commutation of
3.50 3.60
pension for cash at retirement nil nil
Assumptions regarding future mortality are based on
published statistics and mortality tables.
The best estimate of contributions to be paid to the
primary plan for the year ending December 31, 2011 is
$1,127. In the additional pension plan, only payments for
expenses to run the plan, together with the levy for the
Pension Protection Fund, are expected to be made in 2011.
ALD plans
ALD has defined benefit plans that cover employees in
Germany. The benefits are based on years of service and
average compensation.
On March 30, 2010, the Company entered into an additional
Supplemental Executive Retirement Plan (“German
SERP”) with Dr. Reinhard Walter, President of Engineering
Systems. Pursuant to the terms of the German SERP,
Dr. Walter will earn additional retirement benefits for
continued service with the Company. The maximum
retirement benefit payment under the German SERP
is $315 per annum reduced by retirement benefits as
determined in accordance with the Company’s ALD plans
and payable from age 65 until age 88. The maximum
retirement benefit payment will also be reduced in the case
of the commencement of benefit payments prior to age 65
as a result of early termination and/or early retirement.
Under the terms of the German SERP, the Company has
no obligation to set aside, earmark or entrust any fund or
money with which to pay the obligations thereto.
Actuarial assumptions
Principal actuarial assumptions at the reporting date are
presented below.
2010 2009
% per annum % per annum
Expected return on plan assets
at January 1 3.75 3.75
Inflation N/A N/A
Salary increases 2.00 2.00
Rate of discount at December 31 5.28 5.41
Pension payments increases 1.75 1.75