Unilever 2014 Annual Report Download - page 57

4B PENSIONS AND SIMILAR OBLIGATIONS ONTINUED
DESRIPTION OF PLANS
The roup ncreasngly operates a number of defned contrbuton plans, the assets of whch are held n external funds In certan
countres the roup operates defned beneft penson plans based on employee pensonable remuneraton and length of servce
The maorty of defned beneft plans are ether career average, fnal salary or hybrd plans and operate on a funded bass Benefts are
determned by the plan rules and are lnked to nflaton n some countres The roup also provdes other post-employment benefts,
manly post-employment healthcare plans n the Unted States These plans are predomnantly unfunded
OVERNANE
The maorty of the roup’s externally funded plans are establshed as trusts, foundatons or smlar enttes The operaton of these
enttes s governed by local regulatons and practce n each country, as s the nature of the relatonshp between the roup and the
Trustees (or equvalent) and ther composton Where Trustees (or equvalent) are n place to operate plans, they are generally requred
to act on behalf of the plan’s stakeholders They are tasked wth perodc revews of the solvency of the fund n accordance wth local
legslaton and play a role n the long-term nvestment and fundng strategy The roup also has an nternal body, the Pensons and
Equty ommttee, that s responsble for settng the company’s polces and decson makng on plan matters, ncludng but not lmted
to desgn, fundng, nvestments, rsk management and governance
INVESTMENT STRATEY
The roup’s nvestment strategy n respect of ts funded plans s mplemented wthn the framework of the varous statutory
requrements of the terrtores where the plans are based The roup has developed polcy gudelnes for the allocaton of assets to
dfferent classes wth the obectve of controllng rsk and mantanng the rght balance between rsk and long-term returns n order to
lmt the cost to the roup of the benefts provded To acheve ths, nvestments are well dversfed, such that the falure of any sngle
nvestment would not have a materal mpact on the overall level of assets The plans contnue to nvest a good proporton of the assets
n equtes, whch the roup beleves offer the best returns over the long term commensurate wth an acceptable level of rsk The plans
expose the roup to a number of actuaral rsks such as nvestment rsk, nterest rate rsk, longevty rsk and, n certan markets,
nflaton rsk There are no unusual entty or plan specfc rsks to the roup For rsk control, the penson funds also have sgnfcant
nvestments n lablty matchng assets (bonds) as well as n property and other alternatve assets addtonally, the roup uses
dervatves to further mtgate the mpact of the rsks outlned above The maorty of assets are managed by a number of external fund
managers wth a small proporton managed n-house Unlever has a pooled nvestment vehcle (Unvest) whch t beleves offers ts
penson plans around the world a smplfed externally managed nvestment vehcle to mplement ther strategc asset allocaton
models, currently for bonds, equtes and alternatve assets The am s to provde hgh qualty, well dversfed, cost-effectve, rsk-
controlled vehcles The penson plans’ nvestments are overseen by Unlever’s nternal nvestment company, the Unvest ompany
ASSUMPTIONS
Wth the obectve of presentng the assets and labltes of the pensons and other post-employment beneft plans at ther far value on
the balance sheet, assumptons under IAS 19 are set by reference to market condtons at the valuaton date The actuaral assumptons
used to calculate the beneft labltes vary accordng to the country n whch the plan s stuated The followng table shows the
assumptons, weghted by labltes, used to value the prncpal defned beneft plans (whch cover approxmately 97% of total penson
labltes) and the plans provdng other post-employment benefts
31 December 2014 31 December 2013
Prncpal
defned beneft
penson plans
Other
post-employment
beneft plans
Prncpal
defned beneft
penson plans
Other
post-employment
beneft plans
Dscount rate 31% 44% 42% 52%
Inflaton 24% n/a 26% n/a
Rate of ncrease n salares 28% 31% 31% 31%
Rate of ncrease for pensons n payment (where provded) 22% n/a 25% n/a
Rate of ncrease for pensons n deferment (where provded) 25% n/a 28% n/a
Long-term medcal cost nflaton n/a 54% n/a 54%
The valuatons of other post-employment beneft plans generally assume a hgher ntal level of medcal cost nflaton, whch falls from 7%
to the long-term rate wthn the next fve years Assumed healthcare cost trend rates have a sgnfcant effect on the amounts reported for
healthcare plans
94 Unilever Annual Report and Accounts 2014Financial statements
NOTES TO THE ONSOLIDATED FINANIAL STATEMENTS
UNILEVER ROUP ONTINUED