Lendlease Annual Report 2022

166 Lendlease Annual Report 2022 Notes to Consolidated Financial Statements continued The liabilities are calculated using a discount rate set with reference to corporate bond yield. If assets underperform this yield, this will create a deficit. A decrease in corporate bond yield will increase the value placed on the Scheme’s liabilities, although this will be partially offset by an increase in the value of the Scheme’s corporate bond holdings. The majority of the Scheme’s benefit obligations are linked to inflation and higher inflation will lead to higher liabilities, although in most cases this will be capped to protect against extreme inflation. The majority of the assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit. The majority of the Scheme’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities. The mortality assumptions are based on standard mortality tables which allow for expected future mortality improvements. The assumption is that a member aged 63 will live for a further 25.3 years (June 2021: 25.3 years) if they are male and 26.8 years if they are female (June 2021: 26.3 years). At 30 June 2022, the weighted average duration of the defined benefit obligation was 16 years (June 2021: 18 years). vii. Sensitivity Analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown below: 0.1% Increase in Discount Rate $m 0.1% Decrease in Discount Rate $m 0.1% Increase RPI Inflation and Pension Payment $m 0.1% Decrease RPI Inflation and Pension Payment $m 1 Year Increase in Future Mortality $m 1 Year Decrease in Future Mortality $m June 2022 Defined benefit obligations (14) 14 11 (11) 22 (21) June 2021 Defined benefit obligations (22) 23 17 (13) 37 (38) The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Non pensioner benefits are linked to RPI in the period up to retirement. Once in payment, pension increases are linked to RPI but with a zero per cent floor and different caps applying to different periods of pensionable service. The inflation sensitivity reflects a change in RPI inflation and the associated increases in payment. 35. Employee Benefits Detailed information regarding the Group’s Executive Reward strategy is provided in the Remuneration Report within the Directors’ Report. The key incentive plans are as follows: • Short Term Incentive (STI) • Short Term Award (STA) • Long Term Incentive (LTI) • Long Term Award (LTA) • Restricted Securities Award (RSA) • Executive Deferred Award (ED Award) • Deferred Equity Award (DEA) • Pro Rata CEO Grant • Google Development Ventures (GDV) Incentive. 35.a. Short Term Incentive (STI) The STI plan is an annual incentive plan whereby a number of employees receive benefits which are dependent upon the achievement of both Lendlease financial and non financial targets, and individual goals. The total value of the potential benefit varies by individual and is tested against relevant market levels for each role. • The STI plan typically comprises a cash component, which is paid in September following year end. For more senior employees, where the potential benefit is typically higher, the plan also includes a deferred component • Deferral periods are generally for one or two years. The deferred component is normally awarded as Lendlease securities and in some instances as cash. Securities are held in Lendlease employee security plan trusts on behalf of employees for the deferral period (refer to Note 29a ‘Employee Security Plans’ ). For employees to receive the deferred component in full, they must generally be employed by the Group at the time of vesting. Section F. Other Notes continued 34. Defined Benefit Plans continued