Note 23 Pension commitments and term benefits
Defined benefit pension plans
The Group has obligations for a number of defined benefit pension plans, mainly split between:
- pension funds (66% of the Group’s obligations): these are rights to which employees have earned entitlement, with external pre‑funding requirements predominantly in the US and the UK;
- other mandatory and statutory pension schemes, such as retirement indemnities (31% of the Group’s obligations), particularly in France: rights have not vested so payment is uncertain and notably linked to employees still being with the Company upon retirement;
- medical coverage plans for retirees (2% of the Group’s obligations) consisting of an effective liability vis-à-vis current retirees and a provision for current workers (future retirees), in particular in the US and the UK.
The largest plans are therefore the pension funds in the United Kingdom (29% of the Group’s obligations) and in the United States (24% of the Group’s obligations):
- in the United Kingdom, the Group's obligations are managed through six pension funds and two medical coverage plans, administered by independent joint boards made up of independent external directors. These Boards are required by regulation to act in the best interests of plan beneficiaries, notably by ensuring that the pension funds are financially stable, as well as by monitoring their investment policy and management. All of the six pension funds are closed and frozen. All existing entitlements (based on salary and number of years of service to the Group) have been frozen: beneficiaries still working will not earn any further entitlement under these defined benefit plans. Three funds are in a profit position, and the asset ceiling has been removed in order to show the surplus on the balance sheet. The pension fund obligations in the United Kingdom relate to retirees (82%) and former employees with deferred entitlement who have not yet drawn down their pension entitlements (18%);
- in the United States, the Group’s obligations are basically limited to a closed and frozen pension fund. The obligations relate to former employees with deferred entitlement who have not yet drawn down their pension entitlements (32% of obligations), retirees (46% of obligations) and employees still working (22% of obligations).
Defined benefit pension plan valuations were carried out by independent experts. The main countries concerned are the United States, the United Kingdom, Germany, France, Switzerland, Belgium, the United Arab Emirates, Saudi Arabia, South Korea, the Philippines, Japan, India and Sri Lanka.
The changes brought about by the pension reform, modifying the minimum retirement age and the conditions for obtaining the full pension, applicable since September 2023 in France, constituted a plan amendment under IAS 19, both for end‑of‑career indemnity plans and long‑service awards plans in France.
No material events occurred during the financial year to affect the value of the Group’s liabilities under these plans (significant plan change).
Financial coverage
Publicis Groupe sets aside financial assets to cover these liabilities, primarily in the United Kingdom and the United States, in order to comply with its legal and/or contractual obligations and to limit its exposure to an increase in these liabilities (interest and inflation rate volatility, longer life expectancy, etc.).
The policy to cover the Group’s liabilities is based on regular asset‑liability management reviews to ensure optimal asset allocation, designed both to limit exposure to market risks by diversifying asset classes on the basis of their risk profile and to better reflect the payment of benefits to beneficiaries, having regard to plan maturity. These reviews are performed by independent advisers and submitted to the Trustees for approval. Investments are made in compliance with legal constraints and the criteria governing the deductibility of such covering assets in each country. Funding requirements are generally determined on a plan‑by‑plan basis and as a result a surplus of assets in overfunded plans cannot be used to cover underfunded plans.
Risk exposure
The principal risks to which the Group is exposed through its pension funds in the United Kingdom and the United States are as follows:
- volatility of financial assets: the financial assets in the plans (shares, bonds, etc.) often have a return higher than the discount rate over the long term, but are more volatile in the short term, especially since they are measured at their fair value for the Group’s annual accounting needs. The asset allocation is determined so as to ensure the financial viability of the plan over the long term;
- variation of bond rates: a decrease in corporate bond rates leads to an increase in obligations under the plans as recognized by the Group, even where this increase is partially reduced by an increase in value of the financial assets in the plans (for the portion of investment grade corporate bonds);
- longevity: the largest part of benefits guaranteed by the plans is retirement benefits. An extended life expectancy therefore leads to an increase in these plans;
- inflation: a significant portion of the benefits guaranteed by the pension funds in the United Kingdom is indexed to inflation. A rise in inflation leads to an increase in the obligation (even when thresholds have been set for most of them in order to protect the plan from hyper‑inflation). Most of the financial assets are either not impacted by inflation or weakly correlated with inflation, therefore inferring that a rise in inflation would lead to an increase of the plan’s deficit from an accounting perspective. The American pension funds do not expose the Group to a significant inflation risk as the benefits are not indexed to inflation.
