196 ITV plc Annual Report and Accounts 2023 ITV plc Annual Report and Accounts 2023 197 F I NOTES TO THE FINANCIAL STATEMENTS NAN SECTION 3: OPERATING ASSETS AND LIABILITIES CONTINUED C I AL 3.7 Keeping In this note, we explain the accounting policies governing the Group’s pension Unless otherwise stated, references to Defined Benefit Schemes (‘the Schemes’) within this note refer to the ITV S T it simple schemes, followed by analysis of the components of the net defined benefit Pension Scheme, the Unfunded Scheme and the UTV Pension Scheme combined. Details on each scheme are A Pensions T pension surplus or deficit, including assumptions made, and where the related provided below. E M movements have been recognised in the financial statements. In addition, we have E N placed text boxes to explain some of the technical terms used in the disclosure. The liabilities of the Schemes are measured by discounting the best estimate of future cash flows to be paid using T the ‘projected unit’ method. These calculations are complex and are performed by a qualified actuary. There are S What are the Group’s pension schemes? many judgements and estimates necessary to calculate the Group’s estimated liabilities, the main assumptions are There are two types of pension schemes. A ‘Defined Contribution’ scheme that is set out later in this note. Movements in assumptions during the year are called ‘actuarial gains and losses’ and these open to ITV employees, and a number of ‘Defined Benefit’ schemes that have been are recognised in the period in which they arise through the Consolidated Statement of Comprehensive Income. closed to new members since 2006 and closed to future accrual in 2017. In 2016, on acquisition of UTV Limited, the Group took over the UTV Defined Benefit Scheme, The accounting defined benefit pension surplus or deficit (IAS 19) is different from the actuarial valuation surplus or which closed to future accrual at the end of March 2019. deficit as they are calculated on the basis of different assumptions, such as discount rate. The accounting defined benefit pension surplus or deficit (IAS 19) figure is calculated as at the balance sheet date, and the actuarial What is a Defined Contribution scheme? valuation surplus or deficit (or funding surplus or deficit) is calculated per the last triennial valuation. The Defined Contribution scheme is where the Group makes fixed payments into a separate fund on behalf of those employees participating in saving for their The latest triennial valuation of the ITV Pension Scheme was undertaken as at 31 December 2019 by an independent retirement. ITV has no further obligation to the participating employee and the risks actuary appointed by the Trustee of the Scheme and agreed in early 2022. The funding deficit of Section A of the ITV and rewards associated with this type of scheme are assumed by the members Pension Scheme as at 31 December 2019 amounted to £252 million, down from £489 million at 1 January 2017. rather than the Group. Although the Trustee of the scheme makes available a range of investment options, it is the members’ responsibility to make investment The IAS 19 surplus or deficit does not drive the deficit funding contribution. Following the above triennial valuation of decisions relating to their retirement benefits. Section A of the ITV Pensions Scheme, ITV paid deficit reduction contributions of £40 million in 2023, and expects the deficit reduction contributions to be £53 million in 2024 and £28 million in 2025. What is a Defined Benefit scheme? In a Defined Benefit scheme, members receive payments during retirement, the value The next triennial valuation of the ITV Pension Scheme as at 31 December 2022 by an independent actuary of which is dependent on factors such as salary and length of service. The Group appointed by the Trustee of the Scheme is currently underway and is expected to be agreed in the coming months. makes contributions to the scheme, a separate Trustee-administered fund that is not The Group will then update any required deficit reduction contributions in line with the valuation. consolidated in these financial statements, but is reflected on the defined benefit pension surplus or deficit line in the Consolidated Statement of Financial Position. An unfunded scheme in relation to former beneficiaries who accrued benefits in excess of the maximum allowed for tax purposes is accounted for under IAS 19 and the Group is responsible for meeting the pension obligations as they The Trustee, appointed according to the terms of the Schemes’ documentation, fall due. For the four former Granada executives within the unfunded scheme, there is additional security in the form is required to act in the best interest of the beneficiaries and is responsible of a charge over £48 million (2022: £47 million) of securitised gilts held by the Group, which are classified as other for managing and investing the assets of the Scheme and its funding position. pension assets to reflect the Group’s net pension surplus or deficit. Schemes can be funded, where regular cash contributions are made by the employer into a fund which is invested. In the event of poor investment returns or Due to the size of the UTV Pension Scheme, the Directors present the results and position of the UTV Pension increases in liabilities, the Group may need to address this through increased levels Scheme within this note combined with the existing ITV Schemes. In January 2024, the triennial valuation of the of contribution. Alternatively, schemes can be unfunded, where no regular money or UTV Scheme as at 30 June 2023 was completed. The Scheme had assets of £91 million as at the valuation date assets are required to be put aside to cover future payments but in some cases, and £88 million of liabilities resulting in an agreed Technical Provisions surplus of £3 million and hence there are security is required. no deficit contributions payable. The accounting defined benefit pension surplus or deficit (IAS 19) is different from the The principal employer of the ITV Pension Scheme and the Unfunded Scheme is ITV Services Limited, the Granada actuarial valuation surplus or deficit as they are calculated on the basis of different supplementary scheme is Granada Group Limited and the UTV Pension Scheme is UTV Limited. assumptions, such as discount rate. The accounting defined benefit pension surplus or deficit (IAS 19) figure is calculated as at the balance sheet date. While the actuarial The defined benefit pension surplus (under IAS 19) ember 2023 (2022: £192 million) is stated after including the unfunded surplus or deficit (which drives cash funding requirements) is calculated as part of the Net pension surplus of £209 million at 31 Dec triennial valuations. The next triennial valuation will be as at 31 December 2022 and is scheme security asset of £48 million (2022: £47 million). The totals recognised in 2023 and 2022 are: currently underway for the ITV Pension Scheme. The triennial valuation at 30 June 2023 2022 2023 for the UTV Pension Scheme was agreed in early 2024. £m £m Total defined benefit scheme obligations (2,194) (2,292) Accounting policies Total defined benefit scheme assets 2,355 2,437 Defined contribution scheme Defined benefit pension surplus (IAS 19) 161 145 Obligations under the Group’s defined contribution schemes are recognised as an operating cost in the Consolidated Income Statement as incurred. For 2023, total contributions expensed were £25 million (2022: £29 million). Presented as: Defined benefit scheme Defined benefit pension surplus* 187 172 The Group’s obligation in respect of the Defined Benefit Scheme is calculated by estimating the amount of future Defined benefit pension deficit (26) (27) retirement benefit that eligible employees (‘beneficiaries’) have earned during their services. That benefit payable Defined benefit pension surplus/(deficit) (IAS 19) 161 145 in the future is discounted to today’s value and then the fair value of scheme assets is deducted to measure the defined benefit pension position. Other pension asset 48 47 Net pension surplus 209 192 * Included with the defined benefit pension surplus is the UTV Scheme. The defined benefit scheme assets in the UTV Scheme were valued at £94 million as at 31 December 2023 (2022: £94 million) and the defined benefit scheme obligations were £85 million (2022: £85 million). The following notes provide further detail on the value of the Schemes’ assets and liabilities, how these are accounted for and their impact on the financial statements.