NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
20
RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
The plan in Indonesia typically exposes PT SSS to actuarial risks such as: investment risk, interest rate risk,
longevity risk and salary risk.
Investment risk
The present value of the defined benefit plan liability is calculated using a discount rate
determined by reference to high quality corporate bond yields; if the return on plan
asset is below this rate, it will create a plan deficit. Currently the plan has a relatively
balanced investment in equity securities, debt instruments and deposits. Due to the
long-term nature of the plan liabilities, the board of the pension fund considers it
appropriate that a reasonable portion of the plan assets should be invested in equity
securities to leverage the return generated by the fund.
Interest risk
A decrease in the bond interest rate will increase the plan liability; however, this will be
partially offset by an increase in the return on the plan’s debt investments.
Longevity risk
The present value of the defined benefit plan liability is calculated by reference to
the best estimate of the mortality of plan participants both during and after their
employment. An increase in the life expectancy of the plan participants will increase
the plan’s liability.
Salary risk
The present value of the defined benefit plan liability is calculated by reference to
the future salaries of plan participants. As such, an increase in the salary of the plan
participants will increase the plan’s liability.
The actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried
out by an independent actuary in 2015 and 2014. The present value of the defined benefit obligation, and the
related current service cost and past service cost, were measured using the projected unit credit method.
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Valuation at
2015
2014
Mortality rate
IMT 3
(1)
IMT 3
(1)
Normal pension age
55 years
55 years
Salary incremental rate
7% per annum
7% per annum
Discount rate
9.0% per annum
8.0% per annum
Expected return on investment rate
10% per annum
10% per annum
Resignation rate
10% up to age 25
10% up to age 25
and reducing
and reducing
linearly by 0%
linearly by 0%
at age 55
at age 55
(1) The mortaility rate was derived from observation of Indonesian life insurance policyholders (IMT III) released in 2011 and load 10% to
allow for morbidity or disability.
123
FOCUSED & RESILIENT
SAMUDERA SHIPPING LINE LTD
ANNUAL REPORT 2015
