TDC Group Annual Report 2011(6,4MB) - TDC Annual Report 2011

Note 27 Pension assets and pension obligations
TDC Group Annual Report 2011
Specification of pension costs recognised in the Income Statements DKKm
2011 2010
Defined benefit plans:
Pension income from the domestic defined benefit plan (Operations & HQ) 304 291
Pension cost from the Norwegian defined benefit plans (Nordic) (17) (15)
Net periodic pension income/(costs) from defined benefit plans 287 276
Defined contribution plans (395) (399)
Total pension costs recognised in the Income Statements (108) (123)
Net periodic pension income/(costs) from defined benefit plans is recognised as follows
in the Income Statements:
Service cost 1 recognised in Wages, salaries and pension costs (152) (159)
Interest cost 2 (851) (828)
Expected return on plan assets 3 1,290 1,263
Net interest recognised in Pension income 439 435
Total net periodic pension income/(costs) from defined benefit plans 287 276
1
The increase in the present value of the defined benefit obligation resulting from employees’ services in the current period.
2
The increase in the present value of the defined benefit obligation arising because the benefits are one period closer to settlement. The interest cost represents the unwinding of the
discounting of the pension liabilities.
3
Interest, dividends and other revenue derived from the pension fund assets. The expected return on plan assets is based on market expectations, at the beginning of the period, for
returns over the entire life of the related pension obligation.
A: Domestic defined benefit plan
At 31 December 2011, 1,790 of TDC’s employees (2010:
2,069 ) were entitled to a pension from the pension fund
related to TDC under conditions similar to those provided
by the Danish Civil Servants’ Pension Plan. Of these, 156
(2010:178) employees were seconded to external parties in
connection with outsourcing tasks or divesting operations.
In addition, 8,362 (2010: 8,270) members of the pension
fund receive or are entitled to receive pension benefits.
Future pension benefits are based primarily on years of
credited service and on participants’ compensation at the
time of retirement. Since 1990, no new members have
joined the pension fund plans, and the pension fund is
prevented from admitting new members in the future due
to the articles of association.
The pension fund operates defined benefit plans via a
separate legal entity supervised by the Danish Financial
Supervisory Authority (FSA). In accordance with existing
legislation, articles of association and the pension
regulations, TDC is required to make contributions to meet
the capital adequacy requirements. Distribution of funds
from the pension fund to TDC is not possible until all
pension obligations have been met.
Ordinary monthly contributions to the pension fund are
made corresponding to a percentage of wages.
Extraordinary contributions are made in connection with
redundancy programmes and other retirements. Overall,
the risk of additional capital contributions to the pension
fund can be categorised as investment, longevity and
regulatory risks.
Investment risk is managed within risk tolerance limits to
mitigate excessive risk that could lead to contribution. The
fund invests in a wide variety of marketable securities
(predominantly fixed-income securities) and the return on
the investments has implications for TDC’s financial results.
Uncompensated risk related to nominal interest rates and
inflation has been fully hedged.
Following the introduction of the longevity benchmark by
the Danish FSA, the fund’s actuary has conducted a detailed
longevity statistical analysis which has underpinned the
fund’s assumptions regarding observed current longevity.
However, in line with the sector, the fund has increased its
provision for future expected improvements to longevity.
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