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PENSIONS | 12 Months Ended
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Dec. 31, 2018
Retirement Benefits [Abstract] |
PENSIONS |
24. | 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, 2018, 2017 and 2016 was $1.9 million, $1.7 million and $1.3 million, respectively. 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 $) | 2018 |  |  | 2017 |  |  | 2016 |
Service cost | 250 |  |  | 313 |  |  | 302 |
Interest cost | 1,687 |  |  | 1,901 |  |  | 2,051 |
Expected return on plan assets | (926 | ) |  | (843 | ) |  | (806 | )
Recognized actuarial loss | 1,392 |  |  | 1,182 |  |  | 1,060 |
Net periodic benefit cost | 2,403 |  |  | 2,553 |  |  | 2,607 |
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, 2018 is $1.4 million (2017: $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 $) | 2018 |  |  | 2017 |
Reconciliation of benefit obligation: |  |  |
Benefit obligation at January 1 | 51,171 |  |  | 50,376 |
Service cost | 250 |  |  | 313 |
Interest cost | 1,687 |  |  | 1,901 |
Actuarial (gain)/ loss | (3,265 | ) |  | 873 |
Foreign currency exchange rate changes | (599 | ) |  | 1,008 |
Benefit payments | (3,151 | ) |  | (3,300 | )
Benefit obligation at December 31 | 46,093 |  |  | 51,171 |
The accumulated benefit obligation at December 31, 2018 and 2017 was $45.3 million and $50.2 million, respectively.
(in thousands of $) | 2018 |  |  | 2017 |
Reconciliation of fair value of plan assets: |  |  |
Fair value of plan assets at January 1 | 13,634 |  |  | 12,503 |
Actual (loss)/ return on plan assets | (249 | ) |  | 1,039 |
Employer contributions | 3,617 |  |  | 2,316 |
Foreign currency exchange rate changes | (730 | ) |  | 1,076 |
Benefit payments | (3,151 | ) |  | (3,300 | )
Fair value of plan assets at December 31 | 13,121 |  |  | 13,634 |
(in thousands of $) | 2018 |  |  | 2017 |
Projected benefit obligation | (46,093 | ) |  | (51,171 | )
Fair value of plan assets | 13,121 |  |  | 13,634 |
Unfunded status (1) | (32,972 | ) |  | (37,537 | )
Employer contributions and benefits paid under the pension plans include $3.6 million (2017: $2.3 million) paid from employer assets for the year ended December 31, 2018. (1) Our plan comprises two schemes. The details of these schemes are as follows:
| December 31, 2018 |  | December 31, 2017
(in thousands of $) | UK Scheme |  |  | Marine Scheme |  |  | Total |  |  | UK Scheme |  |  | Marine Scheme |  |  | Total |
Projected benefit obligation | (9,818 | ) |  | (36,275 | ) |  | (46,093 | ) |  | (11,654 | ) |  | (39,517 | ) |  | (51,171 | )
Fair value of plan assets | 12,291 |  |  | 830 |  |  | 13,121 |  |  | 12,968 |  |  | 666 |  |  | 13,634 |
Funded (unfunded) status at end of year | 2,473 |  |  | (35,445 | ) |  | (32,972 | ) |  | 1,314 |  |  | (38,851 | ) |  | (37,537 | )
The fair value of our plan assets, by category, as of December 31, 2018 and 2017 were as follows:
(in thousands of $) | 2018 |  |  | 2017 |
Equity securities | 12,291 |  |  | 9,921 |
Debt securities | — |  |  | 3,047 |
Cash | 830 |  |  | 666 |
| 13,121 |  |  | 13,634 |
The amounts recognized in accumulated other comprehensive income consist of:
(in thousands of $) | 2018 |  |  | 2017 |
Net actuarial loss (see note 26) | 9,218 |  |  | 12,799 |
The actuarial loss recognized in other comprehensive income is net of tax of $0.4 million, $0.3 million, and $0.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. The asset allocation for our Marine scheme at December 31, 2018 and 2017, by asset category are as follows:
Marine scheme |  |  | 2018 (%) |  | 2017 (%)
Cash |  |  | 100 |  | 10,000
Total |  |  | 100 |  | 100
The asset allocation for our UK scheme at December 31, 2018 and 2017, by asset category are as follows:
UK scheme |  |  | 2018 (%) |  | 2017 (%)
Equity |  |  | 100 |  | 76.5
Bonds |  |  | — |  | 23.5
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, 2019, as follows:
(in thousands of $) | UK scheme |  | Marine scheme |
Employer contributions | 510 |  |  | 2,900 |
We are expected to make the following pension disbursements as follows:
(in thousands of $) | UK scheme |  |  | Marine scheme |
2019 | 330 |  |  | 3,000 |
2020 | 410 |  |  | 3,000 |
2021 | 535 |  |  | 3,000 |
2022 | 355 |  |  | 3,000 |
2023 | 370 |  |  | 3,000 |
2024 - 2028 | 2,310 |  |  | 12,500 |
The weighted average assumptions used to determine the benefit obligation for our plans for the years ended December 31 are as follows:
| 2018 |  |  | 2017 |
Discount rate | 3.90 | % |  | 3.40 | %
Rate of compensation increase | 2.20 | % |  | 2.32 | %
The weighted average assumptions used to determine the net periodic benefit cost for our plans for the years ended December 31 are as follows:
| 2018 |  |  | 2017 |
Discount rate | 3.40 | % |  | 3.87 | %
Expected return on plan assets | 6.75 | % |  | 6.75 | %
Rate of compensation increase | 2.32 | % |  | 2.38 | %
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, 2018 and 2017 is based on the weighted average of various returns on assets using the asset allocation as at the beginning of 2018 and 2017. For equities and other asset classes, we have applied an equity risk premium over ten year governmental bonds.

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