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All retirement plan related actuarial gains or losses are recognised in other comprehensive income in the pension reserve in the year in which they arise.
Principal assumptions made in the actuarial calculation of the defined benefit obligation relate to the discount rate, rate of salary inflation and life expectancy. The calculation of the defined benefit obligations are based on years of service and the employees' compensation during their years of employment. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. These obligations are accounted for in accordance with NZ IAS 19 Employee Benefits, which has the effect of recognising the volatility in the returns earned by the plans in the pension reserve. The following table provides the weighted average assumptions used to develop the net periodic pension cost and the actuarial present value of projected benefit obligations for the Group's plans:
2018 % 2.53 2.69
2017 % 2.79 2.43
Assumed discount rate on benefit obligations Annual rate of increase in future compensation levels
Expected returns on plan assets have been determined by the independent actuaries as the weighted average of the expected return after tax and investment fees for each asset class by the target allocation of assets to each class.
During the year the Group contributed less than $1 million (2017: less than $1 million) in respect of its Australian defined benefit plans and $10 million (2017: $29 million) in respect of its Formica defined benefit and medical plans. It contributed $71 million (2017: $66 million) in respect of its defined contribution plans worldwide, including Kiwisaver. Fletcher Building Limited has an obligation to ensure that the funding ratio of the New Zealand plan's assets is at least 115% of the plan's actuarial liability. This is based upon any two consecutive annual actuarial valuations as calculated by the plan's actuary. This calculation is done on the plan's funding basis, which is completed in accordance with NZ IAS 26 Retirement Benefit Plans . At 31 March 2018, the value of the plan assets was 155% of the actuarial liability and the funded surplus was $101 million (31 March 2017: 146%, $88 million). The Group expects to contribute at least $16 million to its overseas defined benefit plans during the year to 30 June 2019.
June 2018 NZ$M
June 2017 NZ$M
Fletcher Building Group Net periodic pension cost Service cost
7
8 2
(2)
Net interest cost
Net periodic pension cost – recognised in earnings before interest and taxation
5
10
Recognised net asset/(liability) Assets of plans Projected benefit obligation Funded surplus/(obligation)
756
827
(694)
(793)
62
34
(12)
Asset ceiling effect
(1)
Recognised net asset/(liability)
50
33
Recognised net asset/(liability) by jurisdiction: New Zealand plan
66 22 88
54 17 71
Australian plans
Retirement plan assets – recognised within non-current assets
(38) (38)
Other overseas plans
(38) (38)
Retirement plan liabilities – recognised within non-current liabilities
Recognised net asset/(liability)
50
33
97 Fletcher Building Limited Annual Report 2018
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