Annual report and accounts 2016

149
e
Present value of scheme liabilities
A reconciliation of the opening and closing balances of the present value of the defined benefit obligations is set out below:
€ million 2016 2015
January 1 27,670 26,120
Acquired through Business combination – 21
Current service cost 196 265
Past service cost (52) (1)
Interest expense 921 1,024
Remeasurements – financial assumptions 5,624 (498)
Remeasurements – demographic assumptions (137) (183)
Benefits paid (1,315) (1,276)
Employee contributions 111 114
Exchange movements (3,825) 2,084
December 31 29,193 27,670
The defined benefit obligation comprises €33 million (2015: €79 million) arising from unfunded plans and €29,160 million
(2015: €27,591 million) from plans that are wholly or partly funded.
f Effect of the asset ceiling
A reconciliation of the effect of the asset ceiling representing the IAS 19 irrecoverable surplus in APS is set out below:
€ million 2016 2015
January 1 561 502
Interest expense 19 19
Remeasurements 81 –
Exchange movements (81) 40
December 31 580 561
g Actuarial assumptions
The principal assumptions used for the purposes of the actuarial valuations were as follows:
2016 2015
Per cent per annum
APS NAPS
Other
schemes APS NAPS
Other
schemes
Discount rate 1 2.60 2.70 1.5 – 4.1 3.60 3.85 2.1 – 4.4
Rate of increase in pensionable pay 2 3.20 3.20 3.0 – 3.7 2.85 3.00 3.0 – 4.0
Rate of increase of pensions in payment 3 2.10 2.10 0.4 – 3.5 1.85 2.00 1.5 – 3.5
RPI rate of inflation 3.20 3.20 3.0 – 3.2 2.85 3.00 3.0 – 3.2
CPI rate of inflation 2.10 2.10 1.75 – 3.0 1.85 2.00 1.7 – 3.0
Strategic Report Corporate Governance Financial Statements Additional Information
1 Discount rate is determined by reference to the yield on high quality corporate bonds of currency and term consistent with the scheme liabilities. The decline in these yields has
resulted in lower discount rates being applied in 2016.
2 Rate of increase in pensionable pay is assumed to be in line with long-term market inflation expectations. The inflation rate assumptions for NAPS and APS are based on the
difference between the yields on index-linked and fixed-interest long-term government bonds.
3 It has been assumed that the rate of increase of pensions in payment will be in line with CPI for APS and NAPS. However, the APS Trustees have proposed an additional discretionary
increase of 20 basis points for the year to March 31, 2014, a decision that British Airways has challenged. British Airways initiated legal proceedings to determine the legitimacy of the
additional increase, the outcome of which is expected in 2017. The proposed discretionary increase is not included in the assumptions above.
Rate of increase in healthcare costs is based on medical trend rates of 6.75 per cent grading down to 5.0 per cent over seven years
(2015: 7.0 per cent to 5.0 per cent over eight years).
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