13 Provisions for pensions and similar obligations

As a general rule, pension plan obligations are based on the length of employee service.
Performance-linked benefit obligations – for which the company guarantees a certain level of benefit – are provided for through a provision for pensions. Viterra has not separately funded its pension obligations.

Pension plan obligations, mainly for staff located in Germany, and the expenses necessary to cover these obligations are determined using the projected unit credit method prescribed by SFAS 87, whereby current pensions and vested rights as well as future increases in these parameters are included in the valuation.

The change in the projected benefit obligation is as follows:


	2003	2002

	€ million	€ million

Projected benefit obligation as of January 1	198.9	201.3

Service cost	1.7	2.4

Interest cost	11.6	11.1

Business combinations	0.0	5.2

Actuarial losses	19.8	0.3

Benefits paid	–15.3	–14.9

Discontinued operations	–1.3	–6.9

Transfer of pension commitments	1.1	0.4
Projected benefit obligation as of Dec. 31	216.5	198.9

With some Group companies, the accumulated benefit obligation exceeds the unfunded accrued benefit pension costs. For this reason, provisions for pensions have been increased by an additional minimum liability of € 33.7 million (2002: € 17.7 million) which does not affect net income. The accumulated benefit obligation totals € 211.8 million (2002: € 194.7 million).

The following table shows a reconciliation of the projected benefit obligation to the provisions for pensions disclosed in the balance sheet:


	2003	2002

	€ million	€ million

Projected Benefit Obligation	216.5	198.9

Unrecognised actuarial loss	–38.3	–21.4

Unfunded accrued benefit cost	178.2	177.5

Additional minimum liability	33.7	17.7
Provisions for pensions disclosed in the balance sheet	211.9	195.2

The total net periodic pension cost comprises the following:


	2003	2002

	€ million	€ million

Service cost	1.7	2.4

Interest cost	11.6	11.1

Net amortisation of gains/losses	2.3	0.3
Net periodic pension cost	15.6	13.8

The provisions for pensions were calculated on the basis of the following assumptions:


	2003	2002


Discount rate	5.50 %	5.75 %

Projected salary increases	2.75 %	2.75 %

Projected pension payment increases	1.25 %	1.25 %

Pension costs were calculated on the basis of the following assumptions:


	2003	2002


Discount rate	5.75 %	5.75 %

Projected salary increases	2.75 %	2.75 %

Projected pension payment increases	1.25 %	1.25 %

The cut-off date for the determination of pension obligations is September 30.