NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 25 EMPLOYEE BENEFITS (CONT’D) The fair values of plan assets in each category are as follows: Group 2023 2022 $’000 $’000 Equity 9,959 8,394 Bonds 11,942 10,154 Cash 66,925 66,590 Fair value of plan assets 88,826 85,138 Expenses recognised in profit or loss Current service costs 272 329 Past service costs – (53) Net interest costs 314 378 Defined benefit obligation expenses 586 654 The expenses are recognised in the following line items in profit or loss: Group Note 2023 2022 $’000 $’000 Cost of sales 195 124 Administrative expenses 339 448 Other operating expenses 52 82 Defined benefit obligation expenses 32 586 654 The weighted average duration of the defined benefit obligations as at 31 December 2023 was 12 years (2022: 11 years). The Group expects approximately Nil (2022: $8 million (£5 million)) contributions to be paid to the defined benefit plans in 2024 (2022: 2023). The Group operates various funded pension schemes which are established in accordance with local conditions and practices within the countries concerned. The most significant funds are described below: United Kingdom (UK) The Group makes contributions to a pension scheme for its UK employees, which was set up in 1993. The plan operates a funded defined benefit arrangement together with a defined contribution plan, both with different categories of membership. The defined benefit section of the plan was closed to new entrants in 2001 and at the same time, rights to a guaranteed minimum pension (GMP) under the defined contribution scheme also ceased. The plan entitles a retired employee to receive an annual pension payment. The contributions required are determined by a qualified actuary on the basis of triennial valuations using the projected unit credit method. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 5 April 2020 and this has been updated on an approximate basis to 31 December 2023. The contributions of the Group during the year were about 36.30% (2022: 36.30%) of pensionable salary. As the defined benefit section is closed to new entrants, the current service cost, as a percentage of pensionable payroll is likely to increase as the membership ages, although it will be applied to a decreasing pensionable payroll. The assumptions which have the most significant effect on the results of the valuation are those relating to the discount rate and the rates of increase in salaries and pensions. 25 EMPLOYEE BENEFITS (CONT’D) Taiwan The Group makes contributions to a defined benefit pension plan for its employees in Taiwan. The contributions required are determined by an external qualified actuary using the projected unit credit method. The most recent valuation was carried out on 31 December 2023. The contributions of the Group were no less than 6% (2022: 6%) of the employees’ earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and the rate of increase in salaries. The defined benefit plans are administered by pension funds that are legally separated from the Group. The boards of the pension funds are required by law to act in the best interests of the plan participants. These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market investment risk. The above plans are substantially funded by the Group’s subsidiary. The funding requirements are based on pension funds’ actuarial measurement framework set out in the funding policies of the plans. The assets of each scheme have been taken at market value and the liabilities have been calculated using the following principal assumptions: 2023 2023 2022 2022 UK Taiwan UK Taiwan Inflation rate 3.2% – 3.3% – Discount rate 4.7% 1.4% 4.9% 1.5% Rate of salary increase 3.7% 3.0% 3.8% 3.0% Rate of pension increases 3.0% – 3.1% – Rate of revaluation 2.8% – 2.8% – The methodology for computing the discount rate is the yield range method. The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale covered, may not necessarily be borne out in practice. The present values of the schemes’ liabilities are derived from cash flow projections over long periods and are inherently uncertain. Sensitivity analysis The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises how the impact on the defined benefit obligation at the end of the reporting period would have increased/(decreased) as a result of a change in one of the relevant actuarial assumptions by one percent, holding other assumptions consistent. Defined benefit obligation 1 percent increase 1 percent decrease $’000 $’000 Group 2023 Discount rate (8,941) 10,677 Rate of salary increase 676 (614) 2022 Discount rate (9,329) 11,781 Rate of salary increase 912 (683) FINANCIALS FINANCIALS ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED 191 190
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