Lendlease Annual Report 2022

Financial Statements 165 June 2022 June 2021 $m $m ii. Reconciliation of Defined Benefit Obligations Defined benefit obligations at beginning of financial year 1,272 1,324 Included in Income Statement Interest cost 24 19 Remeasurements Included in Other Comprehensive Income Actuarial loss/(gain) arising from: Financial assumptions (332) (45) Experience adjustments 15 (19) Demographic assumptions 14 (21) Other Benefits paid (34) (33) Effect of foreign exchange rate movements (57) 47 Defined benefit obligations at end of financial year 902 1,272 iii. Reconciliation of the Fair Value of Plan Assets Fair value of plan assets at beginning of financial year 1,515 1,481 Included in Income Statement Interest income 28 22 Administration costs (3) (2) Remeasurements Included in Other Comprehensive Income Actuarial return on plan assets excluding interest income (254) (44) Other Contributions by Group companies 5 31 Benefits paid (36) (33) Effect of foreign exchange rate movements (71) 60 Fair value of plan assets at end of financial year 1,184 1,515 iv. Expense Recognised in the Income Statement Net interest cost (4) (3) Administration costs 3 2 Net defined benefit plan income (1) (1) v. Fair Value of Plan Assets Plan assets comprise: Investment funds 430 431 Infrastructure 107 87 Government index linked bonds 608 956 Other assets 39 41 Fair value of plan assets at end of financial year 1,184 1,515 The investment funds target an absolute level of return. The plan assets can be categorised as Level 1, where the fair value is determined using an unadjusted quoted price for an identical asset, or Level 2, where the fair value is derived either directly or indirectly from observable inputs, or Level 3, where inputs are unobservable (i.e. for which market data is unavailable). At year end, approximately $1,077 million (June 2021: $1,428 million) and $107 million (June 2021: $87 million) of total plan assets were categorised as Level 2 and Level 3, respectively. UK Construction and Trustees have agreed to a long term strategy for reducing investment risk as and when appropriate. This includes an asset–liability matching policy which aims to reduce the volatility of the funding level of the pension plan by investing in assets that perform in line with the liabilities of the plan so as to protect against inflation being higher than expected. The current targeted benchmark allocation is 22.5 per cent growth assets and 77.5 per cent matching assets (June 2021: 67.5 per cent growth assets and 32.5 per cent matching assets). June 2022 June 2021 vi. Principal Actuarial Assumptions Discount rate (%) 3.8 2.0 RPI inflation (%) 3.5 3.5 Average pension increase in payments (%) 2.7 2.7 Future mortality (years): Male 25.3 25.3 Female 26.8 26.3