Changes in bond yields: A decrease in bond yields will typically increase plan liabilities (and vice-versa), although this will be o set partially by an increase in the value of bonds held in the asset portfolios of the various plans. The e ect of changes in bond yields is more pronounced in unfunded schemes where there is no potential for an o setting movement in asset values. Inflation risk: As UK and some European pension obligations are linked to inflation, higher inflation expectations will lead to higher liabilities, although caps are in place to protect against unusually high levels of inflation. The UK asset portfolio includes some inflation linked bonds to provide an element of protection against this risk, whilst additional protection is provided by inflation derivatives. Member longevity: As the Group’s post-employment obligations are generally to provide bene ts for the life of the member, increases in life expectancy will generally result in an increase in plan liabilities (and vice versa).
(d) De ned bene t schemes – demographic factors
Weighted average duration is a measurement technique designed to represent the estimated average time to payment of all cash flows arising as a result of de ned bene t obligations (i.e. pension payments and similar). The weighted average duration (years) of the de ned bene t obligations in the UK, US and Germany are as follows: UK US Germany GKN GKN
De ned bene t obligations are classi ed into those representing ‘active’ members of a scheme or plan (i.e. those who are currently employed by the Group), ‘deferred’ members (i.e. those who have accrued bene t entitlements, but who are no longer employed by the Group and are not yet drawing a pension) and ‘pensioner’ members (ie. those who are currently in receipt of a pension). Additional information regarding the average age, number of members and value of the de ned bene t obligation in each of these categories for the UK, US and Germany are given below:
Age Number Value ( m) Age
Number Value ( m) Age
Number Value ( m)
UK US Germany
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Within the UK, there are two pension schemes referred to as GKN1 and GKN2. GKN1 is a mature scheme, comprised primarily of pensioner members, which is already at peak annual cash outflow (bene t payments); while GKN2 is less mature, with a larger active and deferred population. Bene t payments from GKN2 are forecast to continue to rise until the mid 2030s, when they will peak, before beginning to decline.
(e) De ned contribution schemes
The Group operates a number of de ned contribution schemes. The charge to the income statement in the year was £42 million (2014: £35 million).
Aside from an unrecognised contingent asset, referred to in note 6 in respect of Franked Investment Income, related to advance corporate tax payments and corporate tax paid on certain foreign dividends, there were no other material contingent assets at 31 December 2015 or 31 December 2014. In the case of certain businesses, performance bonds and customer nance obligations have been entered into in the normal course of business.
Contingent assets and liabilities
GKN plc Annual Report and Accounts