Woolworths' pension disclosures FY2014

Notes to the Consolidated Financial Statements

24 EMPLOYEE BENEFITS Amounts recognised in the consolidated income statement in respect of the defined benefit plan are as follows:
2014 2013
$m $m 2014 2013
$m $m
The aggregate employee benefit liability recognised and included in the Financial Statements is as follows:
Current service cost 10.1 19.5
Provision for employee benefits
Plan administration costs 1.0 1.0
Current (Note 17) 820.4 765.7
Current service cost 11.1 20.5
Non-current (Note 17) 134.1 121.8
Net interest/(income) on net defined benefit liability 3.2 (16.0)
Accrued liability for defined benefit obligations (included in other non-current liabilities) 73.9 102.9
Defined benefit cost recognised in profit and loss 14.3 4.5
Accrued salaries and wages (included in trade and other payables) 385.6 367.5
1,414.0 1,357.9 The defined benefit cost is recognised in the employee benefit expense disclosed in Note 2(c).

(a) Retirement Plans Amounts recognised in other comprehensive income in respect of the remeasurement of the defined benefit plan are as follows:
Defined benefit plans
The Company sponsors a defined benefit plan, the Woolworths Group Superannuation Plan (WGSP or the Plan) that provides 2014 2013
$m $m
superannuation benefits for employees upon retirement. The defined benefit plan is closed to new members. The assets of the
WGSP are held in a sub-plan within AMP SignatureSuper that is legally separated from the consolidated entity. Actuarial loss due to experience on the defined benefit obligation 24.7 29.3
The WGSP consists of members with defined benefit entitlements and defined contribution (accumulation) benefits. The Plan also Actuarial gain due to financial assumption changes on the defined benefit obligation – (14.2)
pays allocated pensions to a small number of pensioners. The following disclosures as required by AASB 119 Employee Benefits relate Actuarial loss arising during the period 24.7 15.1
only to the Company’s obligation in respect of defined benefit entitlements. In previous periods, these disclosures were also made
Return on plan assets (greater) than the discount rate1 (39.8) (27.6)
in relation to accumulation benefits. Comparative information has been re-presented accordingly. The impact of this change is not
material to the Group. Remeasurement effects recognised in other comprehensive income (15.1) (12.5)
The consolidated entity contributes to the WGSP at rates as set out in the Trust Deed and Rules and the Participation Deed between the 1 For FY13 this was based on the expected return on plan assets as required by AASB 119 (2008)
Company and AMP Superannuation Limited. Members contribute to the WGSP at rates dependent upon their membership category.
Total defined benefit cost is as follows:
The Plan provides lump sum defined benefits that are defined by salary and period of membership. Many of the defined benefits
provided are also subject to defined contribution minimum benefits. 2014 2013
$m $m
The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at both
reporting dates by Mr John Burnett, FIAA, Towers Watson, using the projected unit credit method. The principal actuarial assumptions Current service cost 11.1 20.5
used for the purpose of the actuarial valuation were as follows: Net interest/(income) on net defined benefit liability 3.2 (16.0)
Remeasurement effects recognised in other comprehensive income (15.1) (12.5)
2014 2013
% % Total defined benefit (income) (0.8) (8.0)

Discount rate1 3.70 3.20 The amount included in the balance sheet arising from the obligation in respect of the defined benefit plan is as follows:
Expected rate of salary increase 3.00 3.00
Rate of price inflation 2.50 2.50 2014 2013
$m $m
1 In FY13 the rate used for determining interest income on plan assets was based on the expected return on fund assets. The discount rate (gross of Defined benefit obligation (528.8) (536.0)
tax) was 3.70%.
Fair value of plan assets 454.9 433.1
Closing net liability for defined benefit obligations (73.9) (102.9)

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Notes to the Consolidated Financial Statements
24 EMPLOYEE BENEFITS continued (i) Defined contribution plans The consolidated entity recognises the fair value at the grant
Movements in the present value of the defined benefit obligation are as follows: Payments to defined contribution retirement benefit plans are date of equity settled share based payments (such as options
recognised as an expense when employees have rendered service or performance rights) as an employee benefit expense
2014 2013 entitling them to the contributions. proportionally over the vesting period with a corresponding
$m $m increase in equity. The fair value of options and performance
(ii) Defined benefit plans
Opening defined benefit obligation 536.0 535.2 rights with the relative TSR performance measure is calculated
The net defined benefit obligation recognised in the consolidated
at the date of grant using the Monte-Carlo simulation model,
Current service cost 11.1 20.5 balance sheet represents the actual deficit or surplus in the
taking into account, amongst other things, the impact of
Interest cost 18.6 14.7 Group’s defined benefit plans which is calculated by estimating
the TSR condition and that right holders are not entitled to
the amount of future benefit that employees have earned in the
Actuarial loss due to experience 24.7 29.3 dividends during the vesting period. The fair value of options
current and prior periods, discounting that amount and deducting
Actuarial (gain) due to financial assumption changes – (14.2) and performance rights with the EPS and NPAT measures, and
the fair value of the plan assets.
retention rights is calculated using the Black-Scholes option
Employee contributions 5.2 5.5
The calculation of the defined benefit obligation is performed at pricing model, taking into account that right holders are not
Benefits paid (62.4) (50.3) the end of each annual reporting period by a qualified actuary entitled to dividends during the vesting period. The fair value per
Administrative expenses paid (0.8) (0.8) using the projected unit credit method. When the calculation instrument is multiplied by the number of instruments expected
Taxes paid (3.6) (3.9) results in a potential asset for the Group, the recognised asset is to vest based on achievement of non-market based performance
limited to the present value of economic benefits available in the conditions (e.g. service conditions) to determine the total cost.
Closing defined benefit obligation 528.8 536.0
form or any future refunds from the plan or reductions in future
On vesting and over the vesting period the amount recognised as
Movements in the fair value of fund assets are as follows: contributions to the plan.
an employee benefit expense will be adjusted to reflect the actual
Remeasurements of the net defined benefit liability, which number of options that vest except where forfeiture is due to
2014 2013 comprise actuarial gains and losses, the return on plan assets failure to achieve market based performance conditions.
$m $m (excluding interest) and the effect of the asset ceiling (if
The consolidated entity operated an Employee Share Plan (ESP)
Opening fair value of fund assets 433.1 403.5 any, excluding interest), are recognised immediately in other
whereby it provided interest free loans to selected employees
comprehensive income and will not be reclassified to profit or loss.
Interest income1 15.4 30.7 to purchase shares in the Company. All shares acquired under
Return on plan assets greater than discount rate1 39.8 27.6 The Group determines the net interest expense (income) on the ESP are held by a wholly owned subsidiary of Woolworths as
Employer contributions 28.2 20.8 the net defined benefit liability for the period by applying the trustee of the share plan trust. Dividends paid by Woolworths are
discount rate at the beginning of the period to the net defined used to repay the loan (after payment of a portion of the dividend
Employee contributions 5.2 5.5 benefit liability, taking into account any changes during the to the employee to cover any tax liabilities).
Benefits paid (62.4) (50.3) period as a result of contributions and benefit payments. Net
The loans are limited recourse and if the employee elects not
Administrative expenses paid (0.8) (0.8) interest expense (income), service cost and other expenses
to repay the loan, the underlying shares are sold to recover
Taxes paid (3.6) (3.9) related to defined benefit plans are recognised in the consolidated
the outstanding loan balance. These have been accounted for
income statement.
Closing fair value of fund assets 454.9 433.1 as an in-substance option in the financial statements of the
(iii) Long term employee benefits consolidated entity.
1 The actual return on plan assets was $55.2 million (2013: $58.3 million) The consolidated entity’s net obligation in respect of long term
This plan was last offered in May 2003 with loans matured in
The WGSP invests entirely in pooled superannuation trust products where prices are quoted on a daily basis. employee benefits, other than defined benefit plans, is the
May 2013. It is not intended to re-open this plan to further offers.
amount of future benefit that employees have earned in return
The major categories of fund assets as a percentage of total fund assets are as follows: for their service in the current and prior periods. The obligation (v) Wages and salaries and related employee benefits
is calculated using expected future increases in wage and salary Provision is made for benefits accruing to employees in respect of
2014 2013 rates including related on-costs and expected settlement dates wages and salaries, annual leave, long service leave and sick leave
% % and is discounted using the rates attached to Government when it is probable that settlement will be required and they are
Equity investments 54 55 bonds at the balance sheet date which have maturity dates capable of being reliably measured. Provisions made in respect of
approximating the terms of the consolidated entity’s obligations. employee benefits expected to be settled wholly within 12 months
Debt instruments 20 18
are recognised and are measured at their nominal values using the
Real Estate 6 6 (iv) Share based payment transactions
remuneration rate expected to apply at the time of settlement.
Other 17 18 Equity settled share based payments form part of the
remuneration of employees (including executives) of the Provisions made in respect of employee benefits which are not
Cash and cash equivalents 3 3 consolidated entity. expected to be settled wholly within 12 months are recognised and
measured as the present value of expected future payments to be
made in respect of services provided by employees up to period
end. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service.

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