Note 16 - Retirement Benefit Plans

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Retirement Benefits [Text Block]

Note 16 — Retirement Benefit Plans

Defined Contribution Plans

We operate two main separate defined contribution retirement benefit plans: a 401(k) plan for U.S. employees and a separate plan for the majority of our international employees.

Substantially all of our U.S. full-time employees are eligible to participate in our 401(k) plan. During the year ended December 31, 2023, we matched 5.0% of employee-eligible compensation in our 401(k) plan.

Expenses related to our 401(k) plan are included in employee compensation and benefits on our Consolidated Statements of Comprehensive Income and were $8.1 million, $8.6 million and $8.3 million during the years ended December 31, 2023, 2022 and 2021, respectively. The assets of the plan are held in trustee-administered funds separately from our assets.

Substantially all of our non-U.S. full-time employees are eligible to participate in our defined contribution plans. The total amounts included in our Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021, in respect to our non-U.S. defined contribution plan were $14.0 million, $15.7 million and $19.0 million, respectively, which represents contributions paid or payable to this plan by us.

Defined Benefit Plans

The main defined benefit pension plan sponsored by us is the defined benefit section of the JHGPS, previously the Henderson Group Pension Scheme, which closed to new members on November 15, 1999. The JHGPS is funded by contributions to a separately administered fund.

Benefits in the defined benefit section of the JHGPS are based on service and final salary. The plan is approved by His Majesty’s Revenue and Customs (“HMRC”) for tax purposes and is operated separately from the Company and managed by an independent trustee board. The trustee is responsible for payment of the benefits and management of the JHGPS assets. We also have a contractual obligation to provide certain members of the JHGPS with additional defined benefits on an unfunded basis.

The JHGPS is subject to UK regulations, which require us and the trustee to agree to a funding strategy and contribution schedule for the scheme.

Our latest triennial valuation of the JHGPS resulted in a surplus on a technical provisions basis of $2.4 million.

Plan Assets and Benefit Obligations

The Plan assets and defined benefit obligations of the JHGPS, including money purchase benefits subject to a reference scheme test, and the unapproved pension plan were valued as of December 31, 2023 and 2022. Our plan assets, benefit obligations and funded status as of the December 31 measurement date were as follows (in millions):

	2023			2022
Change in plan assets:
Fair value of plan assets as of January 1	$	660.5		$	1,142.6
Return on plan assets		15.2			(335.0	)
Employer contributions		2.2			2.1
Benefits paid		(17.9	)		(15.8	)
Settlements		(3.2	)		(9.7	)
Foreign currency translation		39.6			(123.7	)
Fair value of plan assets as of December 31		696.4			660.5
Change in benefit obligation:
Benefit obligation as of January 1		(565.6	)		(975.2	)
Interest cost		(27.6	)		(16.9	)
Settlements		3.2			9.7
Benefits paid		17.9			15.8
Actuarial (loss)/gain		(5.1	)		295.4
Foreign currency translation		(33.9	)		105.6
Benefit obligation as of December 31		(611.1	)		(565.6	)
Funded status as of year-end		85.3			94.9
Net retirement benefit asset recognized in the Consolidated Balance Sheets	$	85.3		$	94.9

Actuarial losses during the year ended December 31, 2023, were primarily due to changes in financial assumptions over the year, including a decrease in the discount rate resulting from lower bond yields, leading to an increase in the benefit obligation. These losses were offset by increases in the asset value, also resulting from lower bond yields, leading to an increase in the fair value of the assets. During the year ended December 31, 2023, $3.2 million was paid to members transferring their benefits out of the scheme, reducing the benefit obligation.

The JHGPS contains a money purchase section (“MPS”) that operates in a similar way to a defined contribution plan, but also provides for a minimum benefit to members of the JHGPS if the investment performance of their MPS investments falls below defined thresholds. The minimum benefit is referred to as a reference scheme test (“RST”) underpin. The RST underpin serves as a defined benefit guarantee in the case that investment returns of the MPS do not meet statutorily defined returns. As the MPS is providing a defined benefit in the form of the RST underpin, disclosure of the related plan assets and liabilities are made on a gross basis, similar to that of a defined benefit plan, and are included in the plan assets and benefit obligations of the retirement benefit asset.

Amounts recognized on our Consolidated Balance Sheets, net of tax at source, as of December 31, 2023 and 2022, consist of the following (in millions):

	December 31,
	2023			2022
Retirement benefit assets recognized in the Consolidated Balance Sheets:
Janus Henderson Group UK Pension Scheme	$	87.6		$	97.9
Retirement benefit obligations recognized in the Consolidated Balance Sheets:		​			​
Janus Henderson Group unapproved pension scheme		(2.3	)		(3.0	)
Net retirement benefit asset recognized in the Consolidated Balance Sheets	$	85.3		$	94.9

We used the following key assumptions in determining the defined benefit obligation as of December 31, 2023 and 2022:

	December 31,
	2023			2022
Discount rate		4.5	%		4.8	%
Inflation — Retail Price Index (“RPI”)		3.1	%		3.3	%
Inflation — Consumer Price Index (“CPI”)		2.5	%		2.7	%
Pension increases (RPI capped at 5% per annum (“p.a.”))		3.0	%		3.2	%
Pension increases (RPI capped at 2.5% p.a.)		2.1	%		2.1	%
Life expectancy of male aged 60 at accounting date		29.1			29.4
Life expectancy of male aged 60 in 15 years’ time		30.1			30.3

The discount rate applied to the plan obligations is based on AA-rated corporate bond yields with similar maturities.

The Company is aware of a court decision in the UK regarding the validity of certain historical modifications to pension scheme rules, including with regard to benefits. More specifically, the judgment voided certain benefit modifications and the original benefits were reinstated, resulting in increased liabilities for the scheme and ultimately for the sponsoring employer. Although the Company was not party to this litigation, the UK court’s decision may have a material impact to other UK pension schemes, including our UK pension scheme. The judgment is subject to appeal and the impact, if any, that this litigation may have on our UK pension scheme is unknown at this time.

Plan Assets

The fair values of the JHGPS plan assets as of December 31, 2023 and 2022, by major asset class are as follows (in millions):

	December 31,
	2023		2022
Cash and cash equivalents	$	19.9	$	1.8
Money market instruments		7.8		8.0
Bulk annuity policy		240.7		230.7
Fixed income investments		300.6		249.3
Equity investments		127.4		170.7
Total assets at fair value	$	696.4	$	660.5

As of December 31, 2023 and 2022, $103.4 million and $148.4 million, respectively, of JHGPS assets were held in JHG-managed funds.

On September 5, 2019, JHGPS and Scottish Widows Limited (“SWL”) entered into a pension buy-in agreement (“agreement”). The agreement provides JHGPS a monthly contractual payment stream from SWL to satisfy pension obligations payable to approximately 43% of total plan participants receiving benefits from JHGPS as of December 31, 2019. The agreement does not relieve JHGPS or JHG (as plan sponsor) of the primary responsibility for the pension obligations. JHGPS paid a premium of approximately £328 million ($404 million) for the agreement, and it was recorded at fair value as a plan asset of JHGPS.

The remaining assets of the JHGPS plan are allocated to a portfolio of fixed income assets. This portfolio aims to broadly match movements in the value of liabilities caused by changes in interest rates and inflation. Excluding the bulk annuity policy, the strategic asset allocation as of December 31, 2023, was 100% fixed income, and as of  December 31, 2022, the allocation was 80% fixed income and 20% growth assets.

The following table presents JHGPS plan assets at fair value on a recurring basis as of December 31, 2023 (in millions):

	Fair value measurements using:
	Quoted prices in
	active markets for
	identical assets		Significant other		Significant
	and liabilities		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash and cash equivalents	$	19.9	$	—	$	—	$	19.9
Money market instruments		7.8		—		—		7.8
Bulk annuity contract		—		—		240.7		240.7
Fixed income investments		300.6		—		—		300.6
Equity investments		127.4		—		—		127.4
Total	$	455.7	$	—	$	240.7	$	696.4

The following table presents JHGPS plan assets at fair value on a recurring basis as of December 31, 2022 (in millions):

	Fair value measurements using:
	Quoted prices in
	active markets for
	identical assets		Significant other		Significant
	and liabilities		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash and cash equivalents	$	1.8	$	—	$	—	$	1.8
Money market instruments		8.0		—		—		8.0
Bulk annuity contract		—		—		230.7		230.7
Fixed income investments		249.3		—		—		249.3
Equity investments		170.7		—		—		170.7
Total	$	429.8	$	—	$	230.7	$	660.5

The value of the bulk annuity contracts increased from $230.7 million at December 31, 2022, to $240.7 million at December 31, 2023. The increase was due to $13.2 million of interest on the bulk annuity asset, $3.3 gain on financial assumptions and foreign currency translation of $13.0 million. The increases were partially offset by changes in demographic assumptions resulting in a decrease of $5.0 million, combined with $14.4 million in cash payments paid under the contract terms.

The expected rate of return on assets for the financial period ending December 31, 2023, was 4.4% p.a. based on financial conditions as of December 31, 2022 (2022: 1.6% p.a.). This rate is derived by taking the weighted average of the long-term expected rate of return on each of the asset classes in JHGPS’s target asset allocation. The expected rate of return has been determined based on yields on either long-dated government bonds or relevant corporate bonds, dependent on the class of asset in question, adjusted where appropriate based on the individual characteristics of each asset class.

Actuarial Gains and Losses

Cumulative amounts recognized in accumulated other comprehensive income and the actuarial gain, net of tax deducted at source, credited to other comprehensive income for the years ended December 31, 2023 and 2022, are shown below (in millions):

	2023			2022
Opening accumulated unamortized actuarial loss as of January 1	$	(70.4	)	$	(32.8	)
Actuarial loss		(18.8	)		(53.1	)
Tax at source on current year actuarial gain		3.5			15.1
Prior service cost		0.5			0.4
Amortization of actuarial loss		0.5			—
Closing accumulated unamortized actuarial loss as of December 31	$	(84.7	)	$	(70.4	)

Net Periodic Benefit Cost

The components of net periodic benefit cost in respect to defined benefit plans for the years ended December 31, 2023, 2022 and 2021, include the following (in millions):

	December 31,
	2023			2022			2021
Service cost	$	—		$	—		$	(0.6	)
Settlement loss		—			—			(1.1	)
Curtailment loss		—			—			(0.3	)
Interest cost		(27.6	)		(16.9	)		(13.5	)
Amortization of actuarial loss		(0.5	)		—			—
Amortization of prior service cost		(0.4	)		(0.4	)		(0.4	)
Expected return on plan assets		28.7			13.8			11.3
Net periodic benefit credit (cost)		0.2			(3.5	)		(4.6	)
Contributions to money purchase section		(11.6	)		(11.5	)		(11.3	)
Total cost	$	(11.4	)	$	(15.0	)	$	(15.9	)

The following key assumptions were used in determining the net periodic benefit cost for the years ended December 31, 2023, 2022 and 2021 (in millions):

	December 31,
	2023			2022			2021
Discount rate		4.8	%		1.9	%		1.3	%
Inflation — salaries		N/A			N/A			2.5	%
Inflation — RPI		3.3	%		3.4	%		2.9	%
Inflation — CPI		2.7	%		2.8	%		2.2	%
Pension increases (RPI capped at 5% p.a.)		3.2	%		3.3	%		2.9	%
Pension increases (RPI capped at 2.5% p.a.)		2.1	%		2.2	%		2.1	%
Expected return on plan assets		4.4	%		1.6	%		1.2	%
Amortization period for net actuarial gains at beginning of the year		28.0			29.0			9.0

Cash Flows

Employer contributions of $2.1 million were paid in relation to our defined benefit pension plans during 2023 (excluding credits to members’ money purchase accounts). We expect to contribute approximately $2.1 million to the JHGPS (excluding credits to members’ money purchase accounts) in the year ended December 31, 2024.

The expected future benefit payments for our pension plan are as follows (in millions):

2024	$	22.1
2025	$	22.4
2026	$	23.8
2027	$	24.7
2028	$	25.1
2029-2033	$	137.6