TUI AG
comprising current service cost. The expenses carried in the previous financial year additionally included a negative past service cost
arising from a plan change in the TUI Group UK Pension Trust.
The net interest expense from pensions declined substantially year-on-year, as many of the pension plans in the UK have a surplus and
therefore generate an interest surplus, which nearly fully offsets the interest expense for the Group's unfunded or underfunded pension
plans.
Pension costs for defined benefit obligations
&euro million 2020 2019
Current service cost for 49.5 39.9
employee service in the period
Curtailment gains 4.0 0.7
Net interest on the net 2.5 13.4
defined benefit liability
Past service cost - - 24.0
Total 48.0 28.6
Provisions for pension obligations are established for benefits payable in the form of retirement, invalidity and surviving dependants'
benefits. Provisions are exclusively formed for defined benefit schemes under which the Company guarantees employees a specific pension
level, including arrangements for early retirement and temporary assistance benefits.
Defined benefit obligation recognised on the balance sheet
&euro million 30 Sep 2020 30 Sep 2019
Total Total
Present value of funded obligations 3,071.3 3,176.5
Fair value of external plan assets 3,373.7 3,397.9
Surplus (-) / Deficit (+) of funded - 302.4 - 221.4
plans
Present value of unfunded pension 954.1 979.4
obligations
Defined benefit obligation recognised on 651.7 758.0
the balance sheet
of which
Overfunded plans in other non-financial 363.3 310.0
assets
Provisions for pensions and similar 1,015.0 1,068.0
obligations
of which current 31.4 32.4
of which non-current 983.6 1,035.6
For funded pension plans, the provision carried only covers the shortfall in coverage between plan assets and the present value of
benefit obligations.
Where plan assets exceed funded pension obligations, taking account of a difference due to past service cost, and where at the same time
there is an entitlement to reimbursement or reduction of future contributions to the fund, the excess is recognised in conformity with
the cap defined by IAS 19. As at 30 September 2020, other non-financial assets include excesses of &euro 363.3 m (previous year &euro
310.0 m).
Development of defined benefit obligations
&euro million Present value Fair value of Total
of obligation plan assets
Balance as at 1 Oct 4,155.9 - 3,397.9 758.0
2019
Current service cost 49.5 - 49.5
Past service cost - - -
Curtailments and - 4.5 0.5 - 4.0
settlements
Interest expense (+) 58.3 - 55.8 2.5
/ interest income (-)
Pensions paid - 179.8 148.6 - 31.2
Contributions paid by - - 81.5 - 81.5
employer
Contributions paid by 1.6 - 1.6 -
employees
Remeasurements 28.2 - 53.7 - 25.5
due to changes in 8.2 - 8.2
financial assumptions
due to changes in 59.8 - 59.8
demographic
assumptions
due to experience - 39.8 - - 39.8
adjustments
due to return on plan - - 53.7 - 53.7
assets not included
in
group profit for the
year
Exchange differences - 62.8 67.7 4.9
Other changes - 21.0 - - 21.0
Balance as at 30 Sep 4,025.4 - 3,373.7 651.7
2020
Development of defined benefit obligations
&euro million Present value Fair value of Total
of obligation plan assets
Balance as at 1 Oct 3,570.8 - 2,701.1 869.7
2018
Current service cost 39.9 - 39.9
Past service cost - 24.0 - - 24.0
Curtailments and - 0.7 - - 0.7
settlements
Interest expense (+) 85.4 - 72.0 13.4
/ interest income (-)
Pensions paid - 166.2 134.6 - 31.6
Contributions paid by - - 111.5 - 111.5
employer
Contributions paid by 1.8 - 1.8 -
employees
Remeasurements 670.4 - 650.5 19.9
due to changes in 734.1 - 734.1
financial assumptions
due to changes in - 65.4 - - 65.4
demographic
assumptions
due to experience 1.7 - 1.7
adjustments
due to return on plan - - 650.5 - 650.5
assets not included
in
group profit for the
year
Exchange differences - 8.6 4.4 - 4.2
Other changes - 12.9 - - 12.9
Balance as at 30 Sep 4,155.9 - 3,397.9 758.0
2019
In the financial year under review, both pension obligations and the value of the plan assets fluctuated, at times strongly, in
particular following the outbreak of the COVID-19-crisis in March. However, at the end of the financial year under review, the Group
posted only slight year-on-year variations. The net obligation declined by &euro 106.3 m to &euro 651.7 m, primarily due to pension
payments and contributions to the pension funds.
At the balance sheet date, TUI Group's fund assets break down as shown in the table below.
Composition of fund assets at the balance sheet date
30 Sep 2020 30 Sep 2019
Quoted market price Quoted market price
in an active market in an active market
&euro yes no yes no
million
Fair value 2,902.5 471.2 2,213.5 1,184.4
of fund
assets at
end of
period
of which 36.3 - 39.3 -
equity
instruments
of which 36.2 - 33.5 -
government
bonds
of which 929.1 - 496.6 -
corporate
bonds
of which 1,449.4 - 1,181.6 -
liability
driven
investments
of absolute 184.9 - 182.8 -
return
bonds
of which 262.7 - 276.0 -
property
of which - 111.2 - 100.1
insurance
policies
of which - 130.9 - 130.3
insurance
linked
securities
of which - 204.0 - 195.9
loans
of which - 25.1 - 751.5
cash
of which 3.9 - 3.7 6.6
other
At the balance sheet date, as in the prior year, fund assets did not comprise any direct investments in financial instruments issued by
TUI AG or its consolidated subsidiaries or any property owned by the Group. For funded plans, investments in passive index tracker funds
may entail a proportionate investment in Group-owned financial instruments.
Pension obligations are measured on the basis of actuarial calculations based on country-specific parameters and assumptions. The
obligations under defined benefit plans are calculated on the basis of the internationally accepted projected unit credit method, taking
account of expected future increases in salaries and pensions. For the pension plans in the UK, expected increases in salaries are not
taken into account as they are no longer relevant for the measurement due to the plan amendment outlined above.
Actuarial assumptions
30 Sep 2020
Percentage Germany Great Other
p. a. Britain countries
Discount 0.7 1.6 0.7
rate
Projected 2.5 0.0 0.9
future
salary
increases
Projected 1.8 2.8 1.3
future
pension
increases
30 Sep 2019
Percentage Germany Great Other
p. a. Britain countries
Discount 0.7 1.7 0.2
rate
Projected 2.5 - 1.2
future
salary
increases
Projected 1.8 3.1 0.9
future
pension
increases
The interest rate applicable in discounting the provision for pensions is based on an index for corporate bonds adjusted for securities
already downgraded and under observation by rating agencies as well as subordinate bonds in order to meet the criterion for high quality
bonds (rated AA or higher) required under IAS 19. The resulting yield structure is extrapolated on the basis of the yield curves for
almost risk-free bonds, taking account of an appropriate risk mark-up reflecting the term of the obligation. In order to cover a
correspondingly broad market, an index partly based on shorter-term bonds is used (for instance for Eurozone bonds from the iBoxx &euro
Corporates AA 10+ and iBoxx &euro Corporates AA 7-10).
Apart from the parameters described above, a further key assumption relates to life expectancy. In Germany, the Heubeck reference tables
2018 G are used to determine life expectancy. In the UK, the S3NxA base tables are used, adjusted to future expected increases on the
basis of the Continuous Mortality Investigation (CMI) 2019. The pension in payment escalation formulae depend primarily on the pension
plan concerned. Apart from fixed rates of increase, there are also a number of inflation-linked pension adjustment mechanisms in
different countries.
Changes in the key actuarial assumptions mentioned above would lead to the changes in defined benefit obligations presented below. The (MORE TO FOLLOW) Dow Jones Newswires
December 10, 2020 01:04 ET (06:04 GMT)
