35. Post-employment benefits – IAS 19 information

(a) Post-employment benefit amounts recognised in the Group financial statements

(i) Balance sheet assets/(obligations)

Pension assets are deemed to be recoverable and there are no adjustments in respect of minimum funding requirements as, under the rules of the UK Experian Pension Scheme, future economic benefits are available to the Group in the form of reductions in future contributions or refunds of surplus.

(ii) Income statement charge

The income statement charge and the remeasurement recognised in the Statement of comprehensive income relate to defined benefit pension plans.

(b) Movements in net post-employment benefit assets/(obligations) recognised in the Group balance sheet

(c) Actuarial assumptions and sensitivities

The accounting valuations at 31 March 2022 have been based on the most recent actuarial valuations, updated to take account of the requirements of IAS 19. The assumptions for the real discount rate, pension increases and mortality, used to calculate the present value of the defined benefit obligations, all have a significant effect on the accounting valuation.

Changes to these assumptions in the light of prevailing conditions may have a significant impact on future valuations. Indications of the sensitivity of the amounts reported at 31 March 2022 to changes in the real discount rate, pension increases, life expectancy and medical costs are included below.

The pension increase assumption is affected by the way that future volatility of the inflation assumption is modelled. Following guidance from our actuarial advisors, this model has been revised in the year ended 31 March 2022 to be consistent with the model used by the Experian Pension Scheme Trustee for funding purposes. The change in estimation approach reduced retirement benefit obligations at 31 March 2022 by approximately US$3m.

The other methods and assumptions used are consistent with those used in the prior year, with the exception of the assumption for increase in salaries. The Scheme was closed to the future accrual of new benefits from 1 April 2022 and consequently no further assumption is required for future pensionable salary growth.

The absolute sensitivity numbers are stated on a basis consistent with the methodology used in determining the accounting valuation as at 31 March 2022. The methodology evaluates the effect of a change in each assumption on the relevant obligations, while holding all other assumptions constant.

(i) Financial actuarial assumptions

The principal financial assumption is the real discount rate, which is the excess of the discount rate over the rate of inflation. The discount rate is based on the market yields on high-quality corporate bonds of a currency and term appropriate to the defined benefit obligations. In the case of the Experian Pension Scheme, the obligations are in pounds sterling and have a maturity on average of 16 years. If the real discount rate increased/decreased by 0.1%, the defined benefit obligations at 31 March 2022 would decrease/increase by approximately US$16m and the fair value of plan assets would decrease/increase by approximately US$18m. There would be no impact on any future annual current service cost, due to the closure of the plan to accrual from 1 April 2022.

The rates of increase for pensions in payment reflect the separate arrangements applying to different groups of Experian’s pensioners. If the inflation rate underlying the pension increases (both in payment and in deferment) increased/decreased by 0.1%, the defined benefit obligations at 31 March 2022 would increase/decrease by approximately US$13m.

(ii) Mortality assumptions – average life expectancy on retirement at age 65 in normal health

The accounting valuation assumes that mortality will be in line with standard tables adjusted to reflect the expected experience of the Experian Pension Scheme membership, based on analysis carried out for the 2019 actuarial valuation. A specific allowance for anticipated future improvements in life expectancy is also incorporated. While COVID-19 has had an impact on mortality in FY22, the impact on future mortality trends is currently unknown and consequently no adjustment has been made to mortality assumptions in this regard. An increase in assumed life expectancy of 0.1 years would increase the defined benefit obligations at 31 March 2022 by approximately US$4m.

(iii) Post-employment medical benefits

The accounting valuation in respect of post-employment medical benefits assumes a rate of increase for medical costs. If this rate increased/decreased by 1.0% per annum, the obligations at 31 March 2022 and the finance expense would remain unchanged.

(d) Assets of the Group’s defined benefit plans at fair value

The Experian Pension Scheme investment strategy aims to reduce investment risk and funding volatility. With the exception of a target 5% allocation to senior private debt, all other assets are regarded as being readily marketable and regularly traded.

The Trustee has adopted funding-based triggers to implement further de-risking of the investment strategy as conditions allow. As a result, during the year the target allocation to equities was reduced from 15% to 10%. These triggers will be kept under review. Over time, the Scheme is expected to increase its allocation to liability matching assets, to provide cash flows to match expected benefit payments.

The Trustee believes that Environmental, Social and Governance (ESG) factors may have a material impact on investment risk and return outcomes. ESG factors, including climate change and stewardship, are increasingly integrated within investment processes both in appointing new investment managers and in monitoring existing investment managers. Monitoring is undertaken and documented on a regular basis, making use of the investment consultant’s ESG rating framework.

The Group’s defined benefit plans have no holdings of ordinary shares or borrowings of the Company.

(e) Future contributions

There was a small funding deficit at the date of the 2016 full actuarial valuation of the Experian Pension Scheme. To correct the shortfall the employer agreed to pay additional contributions of US$4m per annum over five years from 1 April 2017. The employer agreed to continue to pay these contributions notwithstanding the small surplus recognised following the 2019 full actuarial valuation, and the final additional contribution was paid in the year.

As a result of the closure of the Experian Pension Scheme to future accrual, the employer has agreed to pay an additional voluntary contribution equal to 20% of the base salary of participating employees. This payment will be paid either to the Experian Pension Scheme or to the Group’s UK defined contribution plan, at the employees’ option, and US$1m is currently expected to be paid to the Experian Pension Scheme during the year ending 31 March 2023.