

25.	PENSIONS

Defined contribution scheme

We operate a defined contribution scheme. The pension cost for the period represents contributions payable by us to the scheme. The charge to net income for the years ended December 31, 2017, 2016 and 2015 was $1.7 million, $1.3 million and $0.2 million, respectively.

The total contributions to our defined contribution scheme were as follows:



(in thousands of $)	2017	2016	2015
Employers' contributions	1,656	1,324	1,035

Defined benefit schemes

We have two defined benefit pension plans both of which are closed to new entrants but still cover certain of our employees. Benefits are based on the employee's years of service and compensation. Net periodic pension plan costs are determined using the Projected Unit Credit Cost method. Our plans are funded by us in conformity with the funding requirements of the applicable government regulations. Plan assets consist of both fixed income and equity funds managed by professional fund managers.

We use December 31 as a measurement date for our pension plans.

The components of net periodic benefit costs are as follows:



(in thousands of $)	2017		2016		2015
Service cost	313		302		379
Interest cost	1,901		2,051		2,042
Expected return on plan assets	(843	)	(806	)	(946	)
Recognized actuarial loss	1,182		1,060		1,195
Net periodic benefit cost	2,553		2,607		2,670

The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic pension benefit cost during the year ended December 31, 2017 is $1.4 million (2016: $1.2 million).

The change in benefit obligation and plan assets and reconciliation of funded status as of December 31 are as follows:



(in thousands of $)	2017		2016
Reconciliation of benefit obligation:
Benefit obligation at January 1	50,376		49,473
Service cost	313		302
Interest cost	1,901		2,051
Actuarial loss	873		3,547
Foreign currency exchange rate changes	1,008		(1,887	)
Benefit payments	(3,300	)	(3,110	)
Benefit obligation at December 31	51,171		50,376

The accumulated benefit obligation at December 31, 2017 and 2016 was $50.2 million and $49.1 million, respectively.



(in thousands of $)	2017		2016
Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1	12,503		13,194
Actual return on plan assets	1,039		1,994
Employer contributions	2,316		2,342
Foreign currency exchange rate changes	1,076		(1,917	)
Benefit payments	(3,300	)	(3,110	)
Fair value of plan assets at December 31	13,634		12,503



(in thousands of $)	2017		2016
Projected benefit obligation	(51,171	)	(50,376	)
Fair value of plan assets	13,634		12,503
Unfunded status ⁽¹⁾	(37,537	)	(37,873	)

Employer contributions and benefits paid under the pension plans include $2.3 million (2016: $2.3 million) paid from employer assets for the year ended December 31, 2017.

(1) Our plans compose of two plans. The details of these plans are as follows:



	December 31, 2017						December 31, 2016
(in thousands of $)	UK Scheme		Marine Scheme		Total		UK Scheme		Marine Scheme		Total
Projected benefit obligation	(11,654	)	(39,517	)	(51,171	)	(10,461	)	(39,915	)	(50,376	)
Fair value of plan assets	12,968		666		13,634		10,651		1,852		12,503
Funded (unfunded) status at end of year	1,314		(38,851	)	(37,537	)	190		(38,063	)	(37,873	)

The fair value of our plan assets, by category, as of December 31, 2017 and 2016 were as follows:



(in thousands of $)	2017	2016
Equity securities	9,921	8,936
Debt securities	3,047	2,860
Cash	666	707
	13,634	12,503

The amounts recognized in accumulated other comprehensive income consist of:



(in thousands of $)	2017	2016
Net actuarial loss (see note 27)	12,799	12,956

The actuarial loss recognized in other comprehensive income is net of tax of $0.3 million, $0.0 million, and $0.0 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The asset allocation for our Marine scheme at December 31, 2017 and 2016, by asset category are as follows:



Marine scheme	2017 (%)	2016 (%)
Equity	—	30-65
Bonds	—	10-50
Cash	100	20-40
Total	100	100

The asset allocation for our UK scheme at December 31, 2017 and 2016, by asset category are as follows:



UK scheme	2017 (%)	2016 (%)
Equity	76.5	75.2
Bonds	23.5	24.8
Total	100	100

Our investment strategy is to balance risk and reward through the selection of professional investment managers and investing in pooled funds.

We are expected to make the following contributions to the schemes during the year ended December 31, 2018, as follows:



(in thousands of $)	UK scheme	Marine scheme
Employer contributions	541	3,000

We are expected to make the following pension disbursements as follows:



(in thousands of $)	UK scheme	Marine scheme
2018	460	3,000
2019	325	3,000
2020	350	3,000
2021	570	3,000
2022	365	3,000
2023 - 2027	2,460	12,500

The weighted average assumptions used to determine the benefit obligation for our plans for the years ended December 31 are as follows:



	2017		2016
Discount rate	3.40	%	3.87	%
Rate of compensation increase	2.32	%	2.38	%

The weighted average assumptions used to determine the net periodic benefit cost for our plans for the years ended December 31 are as follows:



	2017		2016
Discount rate	3.87	%	4.34	%
Expected return on plan assets	6.75	%	6.75	%
Rate of compensation increase	2.38	%	2.07	%

The overall expected long-term rate of return on assets assumption used to determine the net periodic benefit cost for our plans for the years ended December 31, 2017 and 2016 is based on the weighted average of various returns on assets using the asset allocation as at the beginning of 2017 and 2016. For equities and other asset classes, we have applied an equity risk premium over ten year governmental bonds.