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Pension and Post-Employment Benefits
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Pension and Post-Employment Benefits

Note 10. Pension and Post-Employment Benefits

United Kingdom plan

The Company maintains a defined benefit pension plan covering certain current and former employees in the United Kingdom (the “UK Plan”). The UK Plan is closed to future service accrual and has a large number of deferred and current pensioners. The Projected Benefit Obligation (“PBO”) is based on final salary and years of credited service reduced by social security benefits according to a plan formula. Normal retirement age is 65 but provisions are made for early retirement.

In May 2022, the Trustees of the UK Plan entered into an agreement with Legal and General Assurance Society Limited to acquire an insurance policy that operates as an investment asset, with the intent of matching the remaining uninsured part of the UK Plan’s future cash outflow arising from the accrued pension liabilities of members. Such an arrangement is commonly termed as a “buy-in”. The benefit obligation was not transferred to the insurer, and the Company remains responsible for paying pension benefits. The initial value of the asset associated with this contract was equal to the premium paid to secure the contract and is adjusted each reporting period to reflect the estimated fair value of the premium that would be paid for such a contract at that time. The buy-in reduces the UK Plan’s value at risk in relation to key risks associated with improved longevity, inflation and interest rate movements while improving the security to the UK Plan and its members. The Company consequently benefits from the buy-in as it reduces the UK Plan’s potential reliance on the Company for future cash funding requirements.

In 2023, the Company contributed $0.0 million (2022 – $0.0 million) in cash to the UK Plan in accordance with an agreement with the trustees. For the year ending December 31, 2024, there are no plans to make cash contributions to the UK Plan.

The service cost shown in the table below has been recognized in selling, general and administrative expenses within corporate costs and the other items recognized within other income, net.

 

(in millions)

 

2023

 

 

2022

 

 

2021

 

Service cost

 

$

3.4

 

 

$

2.2

 

 

$

1.6

 

Interest cost on PBO

 

 

19.6

 

 

 

10.1

 

 

 

7.6

 

Expected return on plan assets

 

 

(25.2

)

 

 

(16.0

)

 

 

(15.5

)

Amortization of prior service cost/(credit)

 

 

0.5

 

 

 

0.5

 

 

 

0.3

 

Amortization of actuarial net losses

 

 

(1.6

)

 

 

—

 

 

 

1.6

 

Settlement event

 

 

—

 

 

 

—

 

 

 

(0.3

)

Net periodic benefit

 

$

(3.3

)

 

$

(3.2

)

 

$

(4.7

)

 

Plan assumptions at December 31, (%):

 

2023

 

 

2022

 

 

2021

 

Discount rate

 

 

4.59

 

 

 

4.91

 

 

 

1.84

 

Inflation rate

 

 

2.70

 

 

 

2.85

 

 

 

3.55

 

Rate of return on plan assets – overall on bid-value

 

 

4.25

 

 

 

4.00

 

 

 

2.30

 

 

Plan asset allocation by category (%):

 

2023

 

 

2022

 

 

2021

 

Debt securities and insurance contracts

 

 

96

 

 

 

96

 

 

 

82

 

Equity securities and real estate

 

 

—

 

 

 

—

 

 

 

5

 

Cash

 

 

4

 

 

 

4

 

 

 

13

 

 

 

100

 

 

 

100

 

 

 

100

 

 

Following the buy-in, the UK Plan does not need to follow an investment strategy. The discount rate used represents the annualized yield based on a cash flow matched methodology with reference to an AA corporate bond spot curve and having regard to the duration of the UK Plan’s liabilities.

The inflation rate is derived using a similar cash flow matched methodology as used for the discount rate but having regard to the difference between yields on fixed interest and index linked United Kingdom government gilts.

A 0.25% change in the discount rate assumption would change the PBO at December 31, 2023 by approximately $10.8 million and the net pension credit for 2023 would change by approximately $0.6 million.

A 0.25% change in the level of price inflation assumption would change the PBO at December 31, 2023 by approximately $6.9 million and the net pension credit for 2023 by approximately $0.3 million.

Movements in PBO and fair value of UK Plan assets are as follows:

 

(in millions)

 

2023

 

 

2022

 

Change in PBO:

 

 

 

 

 

 

Opening balance

 

$

404.0

 

 

$

679.1

 

Interest cost

 

 

19.6

 

 

 

10.1

 

Service cost

 

 

3.5

 

 

 

2.2

 

Benefits paid

 

 

(35.6

)

 

 

(45.6

)

Plan amendments

 

 

—

 

 

 

0.4

 

Actuarial losses/(gains)

 

 

10.1

 

 

 

(174.2

)

Exchange effect

 

 

22.5

 

 

 

(68.0

)

Closing balance

 

$

424.1

 

 

$

404.0

 

Fair value of plan assets:

 

 

 

 

 

 

Opening balance

 

$

452.1

 

 

$

838.9

 

Benefits paid

 

 

(35.6

)

 

 

(45.6

)

Actual return on assets

 

 

17.9

 

 

 

(258.7

)

Exchange effect

 

 

24.8

 

 

 

(82.5

)

Closing balance

 

$

459.2

 

 

$

452.1

 

Net pension asset

 

$

35.1

 

 

$

48.1

 

 

Due to the UK Plan being closed to future accrual the PBO is equal to the Accumulated Benefit Obligation.

The UK Plan holds approximately 1% (December 31, 2022 – 1%) of the UK Plan’s assets in debt securities issued by non-U.S. governments and government agencies. No more than 5% of the UK Plan’s assets were invested in any one individual company’s investment funds.

Debt securities

In the prior year, fixed income securities are valued based on quotations received from independent pricing services or from dealers who make markets in such securities and are classified as Level 1. Corporate debt securities are classified as Level 2 in line with the industry standard.

Equity backed securities

In the prior year, common and preferred stock for which market prices are readily available at the measurement date are valued at the last reported sale price or official closing price on the primary market or exchange on which they are actively traded. Other financial derivatives are classified as Level 2 and certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been categorized with a hierarchy.

Other asset backed securities

The Company has invested in insurance contracts, known as buy-in contracts. The value of the insurance contracts are based on significant unobservable inputs including plan participant medical data, in addition to observable inputs which include expected return on assets and estimated value premium. Therefore, we have classified the contracts as Level 3 investments. Fair value estimates are provided by external parties and are subsequently reviewed and approved by management.

The fair values of pension assets by level of input were as follows:

 

(in millions)

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Total

 

At December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities issued by non-U.S.
   governments and government agencies

 

$

4.7

 

 

 

 

 

 

 

 

$

4.7

 

Corporate debt securities

 

 

 

 

 

 

 

 

 

 

 

—

 

Equity backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Other financial derivatives

 

 

 

 

 

 

 

 

 

 

 

—

 

Other asset backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Insurance contracts

 

 

 

 

 

 

 

 

438.7

 

 

 

438.7

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

—

 

Total assets at fair value

 

 

4.7

 

 

 

—

 

 

 

438.7

 

 

 

443.4

 

Cash

 

 

15.8

 

 

 

 

 

 

 

 

 

15.8

 

Total plan assets

 

$

20.5

 

 

$

—

 

 

$

438.7

 

 

$

459.2

 

At December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities issued by non-U.S.
   governments and government agencies

 

$

4.3

 

 

 

 

 

 

 

 

$

4.3

 

Corporate debt securities

 

 

 

 

 

 

 

 

 

 

 

—

 

Equity backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Other financial derivatives

 

 

 

 

 

 

 

 

 

 

 

—

 

Other asset backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

Insurance contracts

 

 

 

 

 

 

 

 

431.8

 

 

 

431.8

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

—

 

Total assets at fair value

 

 

4.3

 

 

 

—

 

 

 

431.8

 

 

 

436.1

 

Cash

 

 

16.0

 

 

 

 

 

 

 

 

 

16.0

 

Total plan assets

 

$

20.3

 

 

$

—

 

 

$

431.8

 

 

$

452.1

 

 

(1)
Certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been categorized in the fair value table with a hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

The reconciliation of the fair value of the UK Plan assets measured using significant unobservable inputs was as follows:

 

(in millions)

 

Other
Assets

 

Balance at December 31, 2021

 

$

162.2

 

Realized/unrealized gains/(losses):

 

 

 

Relating to assets still held at the reporting date

 

 

(206.6

)

Purchases, issuances and settlements

 

 

502.8

 

Exchange effect

 

 

(26.6

)

Balance at December 31, 2022

 

$

431.8

 

Realized/unrealized gains/(losses):

 

 

 

Relating to assets still held at the reporting date

 

 

16.9

 

Purchases, issuances and settlements

 

 

(33.7

)

Exchange effect

 

 

23.7

 

Balance at December 31, 2023

 

$

438.7

 

The projected net periodic benefit for the year ending December 31, 2024 is as follows:

 

(in millions)

 

 

 

Service cost

 

$

3.3

 

Interest cost on PBO

 

 

18.5

 

Expected return on plan assets

 

 

(25.7

)

Amortization of prior service credit

 

 

0.5

 

Amortization of actuarial net losses

 

 

—

 

Net periodic benefit

 

$

(3.4

)

 

The following benefit payments are expected to be made:

 

(in millions)

 

 

 

2024

 

$

34.9

 

2025

 

$

34.8

 

2026

 

$

34.3

 

2027

 

$

34.0

 

2028

 

$

33.5

 

2029-2033

 

$

161.6

 

 

German plan

The Company also maintains an unfunded defined benefit pension plan covering certain current and former employees in Germany (the “German plan”), which is reported within our Fuel Specialties segment. The German plan is closed to new entrants and has no assets.

The service cost shown in the table below has been recognized in selling, general and administrative expenses within corporate costs and the other items recognized within other income, net.

 

(in millions)

 

2023

 

 

2022

 

 

2021

 

Service cost

 

$

0.1

 

 

$

0.1

 

 

$

0.1

 

Interest cost on PBO

 

 

0.3

 

 

 

0.1

 

 

 

0.1

 

Amortization of actuarial net loss/(gain)

 

 

(0.5

)

 

 

0.5

 

 

 

1.0

 

Net periodic cost/(benefit)

 

$

(0.1

)

 

$

0.7

 

 

$

1.2

 

 

Plan assumptions at December 31, (%):

 

Discount rate

 

 

3.70

 

 

 

3.70

 

 

 

0.90

 

Inflation rate

 

 

2.25

 

 

 

2.25

 

 

 

2.00

 

Rate of increase in compensation levels

 

 

2.75

 

 

 

2.75

 

 

 

2.75

 

 

Movements in PBO of the German plan are as follows:

 

(in millions)

 

2023

 

 

2022

 

Change in PBO:

 

 

 

 

 

 

Opening balance

 

$

8.2

 

 

$

13.2

 

Service cost

 

 

0.1

 

 

 

0.1

 

Interest cost

 

 

0.3

 

 

 

0.1

 

Benefits paid

 

 

(0.3

)

 

 

(0.3

)

Actuarial losses/(gains)

 

 

0.6

 

 

 

(4.0

)

Exchange effect

 

 

0.2

 

 

 

(0.9

)

Closing balance

 

$

9.1

 

 

$

8.2

 

 

Other plans

As at December 31, 2023, we have post-employment obligations in our Performance Chemicals European businesses with a liability of $4.2 million (December 31, 2022 – $4.1 million). For the year ended December 31, 2023, we have recognized an actuarial gain of $0.3 million in other comprehensive loss in relation to the Performance Chemicals pension in France (December 31, 2022 – $0.3 million).

Company contributions to defined contribution schemes during 2023 were $12.9 million (2022 – $11.0 million), across all of our reporting segments.