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Rothschild & Co | Annual Report 2017
Note 19 – Retirement benefit obligations
The Group supports various pension schemes for the employees of operating subsidiaries. Where material, these are described below.
The NMR Pension Fund (NMRP) is operated by NMR for the benefit of employees of certain Group companies in the United Kingdom. The Fund comprises
a defined benefit section, which closed to new entrants in 2003, and a defined contribution section, established with effect from the same date.
The NMR Overseas Pension Fund (NMROP) is operated for the benefit of employees of certain Group companies outside the United Kingdom. The defined
benefit section also closed to new entrants, and a defined contribution section was opened, in 2003. The employees in the NMROP stopped earning
additional defined benefit pensions on 5 April 2017. Benefits built up by former in-service members will increase between the date of closure and each
member’s retirement date in line with the standard deferred revaluation in the Fund’s rules. As part of this closure exercise, each member who was in
service on 5 April 2017 was granted an additional 6 months’ service. The cost of this additional service is recognised as a past service cost.
Rothschild North America Inc maintains an unfunded qualified non-contributory defined benefit pension plan and other pension agreements for certain
employees (RNAP). Neither the plan nor the pension agreements provide for health or other benefits for employees or retirees. The last time that new
benefits were accrued was 2001.
RBZ also operates funded pension schemes (RBZP). These schemes have been set up on the basis of the Swiss method of defined contributions but
have characteristics of a defined benefit pension plan. Current employees and pensioners (former employees or their surviving partners) receive benefits
upon retiring as well as in the event of death or invalidity. These benefits are financed through employer and employee contributions.
Additionally, certain companies in the Group have smaller unfunded obligations in respect of pensions and other post-employment benefits.
The latest formal actuarial valuations of the NMRP and the NMROP were carried out as at 31 March 2016. The value of the defined benefit obligation
has been updated to 31 December 2017 by qualified independent actuaries. Valuations of RBZP are performed for each closing, also by qualified
actuaries.
The defined benefit obligations expose the Group to a number of risks, including longevity, inflation, interest rate and investment performance. These risks
are mitigated where possible by applying an investment strategy for the funded schemes which aims to minimise the long-term costs. This is achieved by
investing in a diversified selection of asset classes, which aims to reduce the volatility of returns and also achieves a level of matching with the underlying
liabilities. The matching assets, that the funded schemes invest in, include corporate bonds, government gilts and a specific liability-driven investment
mandate, which provide a partial hedge of the funds’ interest rate and inflation exposure.
Overall, the objective is to select assets which will generate income and capital growth to meet, together with new contributions, the cost of current and
future benefits payable by the funds.
Amounts recognised in the balance sheet
In thousands of euro
NMRP and
NMROP
RBZP
RNAP
Other
31/12/2017
Present value of funded obligations
1,074,756
227,860
–
– 1,302,616
Fair value of plan assets
(1,067,832)
(227,576)
–
– (1,295,408)
Subtotal
6,924
284
–
–
7,208
Present value of unfunded obligations
–
–
16,043
10,498
26,541
TOTAL
6,924
284
16,043
10,498
33,749
of which schemes with net liabilities
19,490
7,241
16,043
10,498
53,272
of which schemes with net (assets)
(12,566)
(6,957)
–
–
(19,523)
In thousands of euro
NMRP and
NMROP
RBZP
RNAP
Other
31/03/2017
Present value of funded obligations
1,095,734
248,079
–
– 1,343,813
Fair value of plan assets
(1,073,137)
(236,745)
–
– (1,309,882)
Subtotal
22,597
11,334
–
–
33,931
Present value of unfunded obligations
–
–
21,109
11,085
32,194
TOTAL
22,597
11,334
21,109
11,085
66,125
of which schemes with net liabilities
33,676
18,078
21,109
11,085
83,948
of which schemes with net (assets)
(11,079)
(6,744)
–
–
(17,823)
Notes to the consolidated financial statements