Johnston Press has revealed how it cut its pension liabilities by £53m through a medically underwritten study to review assumed life expectancy of its members.
The regional newspaper publisher reported in its annual report that the defined benefit (DB) deficit had been slashed by £63m to £27m as of 2 January 2016 following the study and changes to its scheme rules.
This compared to a deficit of £90m as at 3 January 2015, including a £3m IFRIC 14 liability.
The Edinburgh-based group whose titles include The Scotsman and the Yorkshire Post commissioned a review of the IAS19 assumptions used to determine the pension liabilities. This review which was carried out during the period from January 2016 to January 2015 specifically focused on demographic assumptions of its members.
A medically underwritten study was carried out by KPMG to identify the current health of a sample group of existing plan members. It looked at the proportion of males and female members, the number of members with spouses and the age and health of the members surveyed.
This was assessed through telephone interviews targeted towards members with the most significant liabilities.
Output was interpreted by underwriters and then analysed alongside the results from a postcode analysis performed in the prior year. This was translated into mortality assumptions used in calculating the scheme liabilities under the IAS19 accounting standard.
The study of current mortality gave an age rating of +3 years to the standard self-administered pension scheme (SAPS) tables used for the IAS19 disclosure, whereas previously this assumption had been set in line with 104% of SAPS tables.
The scheme's future mortality improvement model was updated to reflect the most recent Continuous Mortality Investigation (CMI) 2015 projections.
The allowance long-term rates of improvement of 1.25% per annum for males and 1% per annum for females have not changed.
This is equivalent to a male life expectancy at 65 of 19.7 years, down from 22 years in 3 January 2015, and female life expectancy at 65 of 21.3 years, down from 23.9 years in 3 January 2015.
As a result, the reduction in assumed life expectancy is equivalent to a £53m decrease in liabilities.
The plan rules adjustments were revised and the additional accounting rule IFRIC 14 liability was reversed following agreement with the trustees.
It also announced the 2 January 2016 triennial valuation had commenced and the outcome will be known later in the year.
Agreed cash contributions based on the 2012 triennial valuation increased from £6.5m in 2015 to £10m in 2016. Thereafter they are likely to increase by 3% per annum with a final payment of £12.7m in 2024.
The group annual Pension Protection Fund's levy charges also reduced from £2.7m in the 2014/15 financial year to £0.7m in 2015/2016. This was as a result of a flexible apportionment arrangement agreed with the trustees.
The group expected to see the full benefit of reduced levy charges in 2016/2017 when the increased pension contributions commence.
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