Defined benefit pension plan
The Company operates a UK registered trust-based pension scheme that provides defined benefits. In 2001, the Company closed the Defined Benefit Pension scheme (“DB Scheme”) to new members, while in 2005 the DB Scheme was closed to the future accrual of benefits, and all active members at that time transferred to a defined contribution scheme, substantially de-risking the Company’s financial and accounting exposure to the DB Scheme’s obligations. Following legal advice in 2017 that the closure had not been completed with respect to the breaking of linkage with future increases in salary, amendments were made in 2018 and the linkage duly broken.
Pension benefits are linked to the members’ final pensionable salaries and service at their retirement (or date of leaving if earlier). The Trustees are responsible for running the DB Scheme in accordance with the DB Scheme’s Trust Deed and Rules, which set out their powers. The Trustees of the DB Scheme are required to act in the best interests of the beneficiaries of the DB Scheme. There is a requirement that one-third of the Trustees are nominated by the members of the DB Scheme.
There are three categories of pension scheme members:
- deferred members with salary linkage: current employees of the Company who have not consented to the break in their salary link
- deferred members: former and current employees of the Company not yet in receipt of pension
- pensioner members: in receipt of pension.
The defined benefit obligation is valued by projecting the best estimate of future benefit outgoings (allowing for future salary increases for deferred members with salary linkage, revaluation to retirement for deferred members and annual pension increases for all members) and then discounting to the statement of financial position date. The majority of benefits receive increases in line with inflation (subject to a cap of no more than 5% per annum). The valuation method is known as the Projected Unit Method. The approximate overall duration of the DB Scheme’s defined benefit obligation as at 31 December 2025 was ten years (2024: ten years).
Future funding obligation
The Trustees are required to carry out an actuarial valuation every three years.
The last actuarial valuation of the DB Scheme was performed by the DB Scheme Actuary for the Trustees as at 5 April 2023. This valuation revealed a funding shortfall of £2.87m.
In respect of the deficit in the DB Scheme as at 5 April 2023, the Company has agreed to pay £643,200 p.a. from 31 July 2024 for four years. In addition, the Company will pay £216,000 p.a. to cover administration expenses, Payment Protection Fund levies and premiums for death in service lump sums associated with the Scheme. The Company therefore currently expects to pay £859,200 to the Scheme during the calendar year beginning 1 January 2026.
Method and assumptions
The initial results of the valuation as at 5 April 2023 have been updated to 31 December 2025 by a qualified independent actuary.
The assumptions used were as follows:
As at 31 December 2025 | As at 31 December 2024 | |
|---|---|---|
Discount rate | 5.60% | 5.50% |
RPI inflation | 2.90% | 3.10% |
CPI inflation | 2.50% | 2.80% |
Salary increases | 2.50% | 2.80% |
Pension increases |
| |
– Post age 88 guaranteed minimum pension | 2.20% | 2.30% |
– Non-guaranteed minimum pension | 2.90% | 3.00% |
Revaluation of deferred pensions in excess of guaranteed minimum pension | 2.50% | 2.80% |
Mortality (pre- and post-retirement) | 100% S4PMA_M / 100% S4PFA_M CMI_2024_M/F [1.25%] (yob) | 100% S4PMA_M / 100% S4PFA_M CMI_2023_M/F [1.25%] (yob) |
Life expectancies (in years):
Year ended 31 December 2025 | Year ended 31 December 2024 | ||||
|---|---|---|---|---|---|
Males | Females | Males | Females | ||
For an individual aged 65 in 2025 | 21.0 | 23.5 | 20.8 | 23.4 | |
At age 65 for an individual aged 45 in 2025 | 22.3 | 24.9 | 22.1 | 24.9 | |
Risks
Through the Scheme, the Company is exposed to a number of risks:
- Asset volatility: the Scheme’s defined benefit obligation is calculated using a discount rate set with reference to corporate bond yields; however, the Scheme invests significantly in equities and other growth assets. These assets are expected to outperform corporate bonds in the long term, but are subject to increased volatility and risk in the short term.
- Changes in bond yields: a decrease in corporate bond yields would increase the Scheme’s defined benefit obligation; however, this would be partially offset by an increase in the value of the Scheme’s bond holdings.
- Inflation risk: a significant proportion of the Scheme’s defined benefit obligation is linked to inflation, therefore higher inflation will result in a higher defined benefit obligation (subject to the appropriate caps in place). The majority of the Scheme’s assets are either unaffected by inflation, or are only loosely correlated with inflation, therefore an increase in inflation would also increase the deficit.
- Life expectancy: if Scheme members live longer than expected, the Scheme’s benefits will need to be paid for longer, increasing the Scheme’s defined benefit obligation.
The Company is aware of the 2023 ruling in the Virgin Media vs NTL Pension Trustees case and subsequent Court of Appeal ruling published in July 2024. These ruled that certain amendments made to the NTL Pension Plan were invalid because they were not accompanied by the correct actuarial confirmation.
On 1 September 2025, the UK government published a list of amendments to the Pension Schemes Bill, which included changes to address issues arising from the Virgin Media ruling. These changes should mean that schemes are able to retrospectively certify historic benefits changes that met the relevant requirements at the time.
As a result, no allowance has been made for this ruling in these disclosures. The Trustees and Company manage risks in the Scheme through the following strategies:
- Diversification: investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
- Investment strategy: the Trustees are required to review their investment strategy on a regular basis.
- Asset-liability matching (ALM): the Scheme invests in an ALM framework that aims to achieve long-term investment returns in line with the obligations under the Scheme. This is achieved through around 25% of assets being invested in liability-driven investment funds.
Change in assumption | Change in defined benefit obligation | |
|---|---|---|
Discount rate | +0.5%/–0.5% p.a. | –5%/+5% |
RPI inflation | +0.5%/–0.5% p.a. | +3%/–4% |
Assumed life expectancy | +1 year | +3% |
These calculations provide an approximate guide to the sensitivity of results and may not be as accurate as a full valuation carried out on these assumptions. Each assumption change is considered in isolation, which in practice is unlikely to occur, as changes in some of the assumptions are correlated.
The assets of the Scheme are invested as follows:
Year ended 31 December 2025 | Year ended 31 December 2024 | ||||
|---|---|---|---|---|---|
Asset class | Market value | % of total Scheme | Market value | % of total Scheme | |
Equities and other growth assets | 1,861 | 8% | 4,676 | 20% | |
Diversified credit funds | 9,461 | 39% | 9,158 | 40% | |
Liability-driven investments | 6,281 | 27% | 6,120 | 26% | |
Cash | 5,356 | 23% | 2,610 | 11% | |
Other | 595 | 3% | 602 | 3% | |
Total | 23,554 | 100% | 23,166 | 100% | |
Actual return on assets over the year | 904 |
| (296) | ||
Note: All assets listed above have a quoted market price in an active market (except for the reserve for insured pensioners).
The amounts recognised in the statement of financial position are determined as follows:
2025 £’000 | 2024 £’000 | |
|---|---|---|
Market value of plan assets | 23,554 | 23,166 |
Present value of Defined Benefit Pension Scheme obligation | (23,512) | (24,718) |
Adjustment in respect of minimum funding requirement | (42) | – |
Deficit – recognised as a liability in the statement of financial position | – | (1,552) |
The movement in the defined benefit obligation over the year is as follows:
2025 £’000 | 2024 £’000 | |
|---|---|---|
Value of defined benefit obligation at the start of the year | 24,718 | 26,464 |
Interest cost | 1,322 | 1,190 |
Benefits paid | (1,375) | (1,205) |
Actuarial (gains)/losses: experience differing from that assumed | (775) | 562 |
Actuarial losses/(gains): changes in demographic assumptions | 146 | (130) |
Actuarial gains: changes in financial assumptions | (524) | (2,163) |
Value of defined benefit obligation at the end of the year | 23,512 | 24,718 |
The movement in the value of the plan assets over the year is as follows:
2025 £’000 | 2024 £’000 | |
|---|---|---|
Market value of plan assets at the start of the year | 23,166 | 23,808 |
Interest income | 1,260 | 1,087 |
Actual return on plan assets | (356) | (1,383) |
Employer contributions | 859 | 859 |
Benefits paid | (1,375) | (1,205) |
Market value of assets at the end of the year | 23,554 | 23,166 |
The table below outlines where the Company’s post-employment amounts and activity are included in the financial statements.
2025 £’000 | 2024 £’000 | |
|---|---|---|
Statement of financial position for: |
| |
– Defined Benefit Pension Scheme obligations | – | (1,552) |
Income statement charge for: | ||
– Defined benefit pension interest cost | (62) | (103) |
Actuarial gains recognised in other comprehensive income for: | ||
– Defined Benefit Pension Scheme | 755 | 348 |
Other pension schemes
On 1 January 2006 a separate stakeholder scheme was set up for those employees who were originally in the closed Defined Benefit Pension Scheme. In addition to the above, the Company created two further stakeholder schemes for future joiners. The contributions paid by the Company in 2025 were £1,372k (2024: £1,238k).
For certain non-UK based employees of the Company, the Company makes contributions into individual schemes. The contributions paid by the Company in 2025 were £7k (2024: £6k).
For USA-based employees, Zotefoams Inc operates a 401(k) plan. The contributions paid by Zotefoams Inc in 2025 were £299k (2024: £425k).