Pension Plan

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Pension Plan

27. Pension Plan

We operate both defined benefit and defined contributions pension schemes in the UK. The defined contribution scheme assets are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company and amounted to $2.1 million, $0.4 million and $2.0 million for the year ended December 31, 2019, the three months ended December 31, 2018 and the year ended September 30, 2018, respectively. Contributions totaling $0.5 million, $0.3 million and $0.2 million were payable to the fund as at December 31, 2019, December 31, 2018 and September 30, 2018, respectively.

The defined benefit section has been closed to new entrants since April 1, 1999 and closed to future accruals for services rendered to the Company for the entire financial statement periods presented in these consolidated financial statements. Retirement benefits are generally based on a portion of an employee's pensionable earnings during years prior to 2010.

The latest triennial actuarial valuation of the scheme as at March 31, 2018 was finalized in May 2019. The actuarial valuation revealed that the statutory funding objective was not met, i.e. there were insufficient assets to cover the Scheme's Technical Provisions and there was a funding shortfall of £5.6 million ($7.4 million) at the valuation date. Under the Recovery Plan and Schedule of Contributions agreed between the Trustee and the Company, on March 15, 2019, it was agreed that no further deficit reduction contributions shall be made to the scheme, except in the event that the scheme funding level does not progress as expected, in which case contingent contributions would be made subject to an agreed maximum amount. At December 31, 2019, it was determined that contingent contributions of $1.1 million will be payable during the year ended December 31, 2020. The funding level of the scheme will next be tested against the expected position as at December 31, 2020 to determine whether contingent contributions are payable over the year to December 31, 2021.

The trustee has made an allowance for the pension scheme liability profile when deciding the investment strategy of the pension scheme. Since the pension scheme is closed to new entrants and ceased future accrual with effect from March 31, 2010, it has continued to mature gradually. Therefore, the trustee reviews the investment strategy regularly to check whether any changes are needed. When considering the investment strategy, the trustee has taken into account the effect of any possible increases in the deficit reduction contributions on the financial position of the Company, and the extent to which the Company will be able to bear these changes.

The scheme's investment policy is to maximize long-term financial return commensurate with security and minimizing risk. This is achieved by holding a portfolio of marketable investments that avoids over-concentration of investment and spreads assets both over industries and geographies. In setting investment strategy, the trustees considered the lowest risk strategy that they could adopt in relation to the scheme's liabilities and designed an asset allocation to achieve a higher return while maintaining a cautious approach to meeting the scheme's liabilities. The trustees undertook a review of investment strategy and took advice from their investment advisors. They considered a full range of asset classes, the risks and rewards of a range of alternative asset allocation strategies, the suitability of each asset class and the need for appropriate diversification. The pension scheme has implemented a new investment strategy over the year to reduce risk without adversely affecting return. The current strategy is to hold 22% in a diversified growth fund, 12% in diversified credit, 15% in equity-linked bonds, 6% in a liability-driven investment fund and 45% in a buy-in policy.

Our pension benefit costs are calculated using various actuarial assumptions and methodologies. These assumptions include discount rates, inflation, expected returns on plan assets, mortality rates and other factors. The assumptions used in recording the obligations under our plans represent our best estimates, and we believe that they are reasonable, based on information as to historical experience and performance as well as other factors that might cause future expectations to differ from past trends. Differences in actual experience or changes in assumptions may affect our pension obligations and future expense. The principal factors contributing to actuarial gains and losses each year are (1) changes in the discount rate used to value pension benefit obligations as of the measurement date and (2) differences between the expected and the actual return on plan assets.

Our valuation methodologies used for pension assets measured at fair value are as follows. There have been no changes in the methodologies used at December 31, 2019, December 31, 2018 and September 30, 2018.

The diversified fund is valued at fair value by using the net asset value ("NAV") of shares held by the plan at the year end. The NAV of the diversified fund is not publicly quoted. The majority of the underlying securities have observable Level 1 or 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. ASC 820, Fair Value Measurements and Disclosures, allows NAV per share to serve as a practical expedient to estimate the fair value of the diversified fund. ASC 820 also states that where NAV is allowed to be used as an estimate of fair value, if the reporting entity has the ability to redeem its investment at NAV as of the measurement date, that investment shall be categorized as a Level II fair value measurement. If the investment cannot be redeemed at the measurement date, but may be redeemable in the future, but at an uncertain date, the investment shall be categorized as a Level 3 fair value measurement.

As of December 31, 2019, December 31, 2018 and September 30, 2018, the diversified fund was redeemable at NAV as of the measurement dates and, therefore, classified as Level 2.

With respect to the buy-in contract, it was agreed during the year ended September 27, 2014, that 281 pensioners of the plan would be insured by means of a pensioner buy-in. The liabilities and assets in respect of insured pensioners are assumed to match for the purposes of ASC 715, Pensions - Retirement Benefits, disclosures (i.e. the full benefits have been insured). The approach adopted has therefore been to include within the total value of assets, an amount equal to the calculated total liability value of the insured pensioners on the actuarial assumptions adopted for ASC 715 purposes. The buy-in contract is, therefore, classified as Level 3.

The following table sets forth the combined funded status of the pension plans and their reconciliation to the related amounts recognized in our consolidated financial statements at the respective measurement dates:

	December 31, 2019			September 30, 2018
	(in millions)
Change in benefit obligation:
Benefit obligation at beginning of period	$	94.1		$	105.9
Interest cost		2.7			2.9
Prior service cost		—			0.5
Actuarial (gain)/loss		14.1			(8.3	)
Benefits paid		(4.2	)		(2.6	)
Foreign currency translation adjustments		3.7			(2.6	)
Benefit obligation at end of period	$	110.4		$	95.8
Change in plan assets:
Fair value of plan assets at beginning of period	$	97.4		$	102.5
Actual gain/(loss) on plan assets		10.3			0.7
Employer contributions		0.2			3.3
Benefits paid		(4.2	)		(2.6	)
Foreign currency translation adjustments		3.6			(2.8	)
Fair value of assets at end of period	$	107.3		$	101.1
Amount recognized in the consolidated balance sheets:
Overfunded (Unfunded) status (non-current)	$	(3.1	)	$	5.3
Net amount recognized	$	(3.1	)	$	5.3

The following table presents the components of our net periodic pension benefit cost:

	December 31, 2019			September 30, 2018
	(in millions)
Components of net periodic pension benefit cost:
Interest cost	$	2.7		$	3.0
Expected return on plan assets		(3.5	)		(3.7	)
Amortization of net loss		0.3			0.4
Net periodic (benefit) cost	$	(0.5	)	$	(0.3	)

The accumulated benefit obligation for all defined benefit pension plans was $110.4 million and $95.8 million as of December 31, 2019 and September 30, 2018, respectively. The overfunded (underfunded) status of our defined benefit pension plans recorded as an asset/liability in our consolidated balance sheets as of December 31, 2019 and September 30, 2018 was $(3.1) million and $5.3 million, respectively.

The estimated net loss, net transition asset (obligation) and prior service cost for the plan that will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year are $0.6 million, $nil and $nil, respectively.

The fair value of the plan assets at December 31, 2019 by asset category is presented below:

	Level 1		Level 2		Level 3		Total
	(in millions)
Diversified fund	$	—	$	68.0	$	—	$	68.0
Buy-in contract		—		—		38.8		38.8
Cash		0.5		—		—		0.5
Total	$	0.5	$	68.0	$	38.8	$	107.3

The fair value of the plan assets at September 30, 2018 by asset category is presented below:

	Level 1		Level 2		Level 3		Total
	(in millions)
Diversified fund	$	—	$	63.9	$	—	$	63.9
Buy-in contract		—		—		36.6		36.6
Cash		0.6		—		—		0.6
Total	$	0.6	$	63.9	$	36.6	$	101.1

The table below presents the weighted-average actuarial assumptions used to determine the benefit obligation and net periodic benefit cost for the Plan.

	December 31, 2019			September 30, 2018
Discount rate		2.10	%		2.90	%
Expected return on assets		3.00	%		3.70	%
RPI inflation		3.00	%		3.20	%
CPI inflation		2.10	%		2.20	%
Pension increases – pre-2006 service		2.90	%		3.10	%
Pension increases – post-2006 service		2.10	%		2.20	%

The following benefit payments are expected to be paid:

	(in millions)
2020	$	2.7
2021	$	2.8
2022	$	2.9
2023	$	3.1
2023	$	3.1
Thereafter	$	19.3