Retirement benefits

12 Months Ended

Dec. 31, 2023

Text Block [Abstract]

Retirement benefits

27. Retirement benefits

UK

Since 2014, UK retirement and death in service benefits are provided for eligible employees by the IHG UK Defined Contribution Pension Plan. Members are provided with defined contribution arrangements under this plan; benefits are based on each individual member’s personal account. The plan is HM Revenue & Customs registered and governed by an independent trustee, assisted by professional advisers as and when required. The overall operation of the plan is subject to the oversight of The Pensions Regulator.

The former defined benefit plan, the InterContinental Hotels UK Pension Plan, was wound up in 2015 following the completion of the buy-out and transfer of the defined benefit obligations to Rothesay Life.

Residual defined benefit obligations remain in respect of additional benefits provided to members of an unfunded pension arrangement (‘UK plan’) who were affected by lifetime or annual allowances under the former defined benefit arrangements. Accrual under this arrangement ceased with effect from 1 July 2013 and a cash-out offer in 2014 resulted in the extinguishment of approximately 70% of the unfunded pension obligations. The Group meets the benefit payment obligations of the remaining members as they fall due. A charge over certain ring-fenced bank accounts totalling $32m (£25m) at 31 December 2023 (see note 16) is currently held as security on behalf of the remaining members.

US

During 2018, the Group completed a termination of the US funded Inter-Continental Hotels Pension Plan, which involved certain qualifying members receiving lump-sum cash-out payments with the remaining pension obligations subject to a buy-out by Banner Life Insurance Company, a subsidiary of Legal & General America.

The Group continues to maintain the unfunded Inter-Continental Hotels Non-qualified Pension Plans (‘US plans’) and unfunded Inter-Continental Hotels Corporation Postretirement Medical, Dental, Vision and Death Benefit Plan (‘US post-retirement plan’), both of which are defined benefit plans. Both plans are closed to new members. A Retirement Committee, comprising senior Group employees and assisted by professional advisers as and when required, has responsibility for oversight of the plans.

Movement in UK and US retirement benefit obligations

	Net defined benefit obligation
	2023 $m			2022 $m			2021 $m
At 1 January		66			92			103
Recognised in profit or loss
Interest expense		3			2			2
		3			2			2
Recognised in other comprehensive income
Actuarial loss/(gain) arising from changes in:
Demographic assumptions		(1	)		(1	)		(3	)
Financial assumptions		2			(22	)		(3	)
Experience adjustments		1			2			(1	)
Re-measurement loss/(gain)		2			(21	)		(7	)
Exchange adjustments		–			(2	)		(1	)
		2			(23	)		(8	)
Other
Group contributions		(5	)		(5	)		(5	)
		(5	)		(5	)		(5	)
At 31 December		66			66			92
Comprising:
UK plan		19			18			30
US plans		34			35			45
US post-retirement plan		13			13			17
		66			66			92

The value of benefits paid is equal to contributions paid into the plans by the Group.

 

Assumptions

The principal financial assumptions used by the actuaries to determine the defined benefit obligations are:

	2023 %		2022 %		2021 %
UK plan only:
Pension increases		3.1		3.2		3.4
Inflation rate		3.1		3.2		3.4
Discount rate:
UK plan		4.8		5.0		1.8
US plans		4.7		4.9		2.4
US post-retirement plan		4.7		4.9		2.4
US healthcare cost trend rate assumed for the next year:
Pre-65 (ultimate rate reached in 2034)		7.8		6.9		6.2
Post-65 (ultimate rate reached in 2034)		8.6		7.3		6.5
Ultimate rate that the cost rate trends to		4.5		4.5		4.5

Mortality is the most significant demographic assumption. The current assumptions for the UK are based on the S3PA ‘light’ year of birth tables with projected mortality improvements using the CMI_2022 model and a 1.25% per annum long-term trend and a smoothing parameter (‘s-kappa’) of 7.0 with weightings of 92% and 86% for pensioners and 87% and 86% for non-pensioners, male and female respectively. In the US, the current assumptions use rates from the Pri-2012 Mortality Study and Generationally Projected with Scale MP-2021 mortality tables. The assumptions applied to the UK plan and US plans for life expectancy at retirement age are as follows:

		UK						US
		2023 years		2022 years		2021 years		2023 years		2022 years		2021 years
Current pensioners at 65a	– male		23		24		24		22		22		22
	– female		25		26		26		23		23		23
Future pensioners at 65b	– male		23		25		25		23		23		23
	– female		25		27		28		25		25		25

a  Relates to assumptions based on longevity following retirement at the end of the reporting period.

b Relates to assumptions based on longevity relating to an employee retiring in 2043.

The assumptions allow for expected increases in longevity.

Sensitivities

Changes in assumptions used for determining retirement benefit costs and obligations may have an impact on the Group income statement and the Group statement of financial position. The key assumptions are the discount rate, the rate of inflation, the assumed mortality rate and the healthcare costs trend rate. The sensitivity analysis below relates to the increase/(decrease) in the benefit obligation and is based on extrapolating reasonable changes in these assumptions, using year-end conditions and assuming no interdependency between the assumptions:

		2023 $m			2022 $m
Discount rate	1% decrease		6			7
	1% increase		(6	)		(5	)
Inflation rate	0.25% decrease		(1	)		(1	)
	0.25% increase		1			1
Mortality rate	One-year increase		3			3
Healthcare costs trend rate	1% decrease		(1	)		(1	)
	1% increase		1			1

Estimated future benefit payments 

	2023 $m		2022 $m
Within one year		5		5
Between one and five years		21		20
More than five years		86		89
		112		114

Average duration of pension obligations

	2023   years		2022   years
UK plan		13.0		14.0
US plans		7.5		7.6
US post-retirement plan		8.0		8.0

Other pension plans

Philippines

The Group maintains a further, immaterial, pension plan for employees in the Philippines which is accounted for as a defined benefit plan.

At 31 December 2023, the net retirement benefit asset was $3m (2022: $2m) comprising plan assets of $12m (2022: $9m) and a defined benefit obligation of $9m (2022: $7m). Plan assets comprise $7m (2022: $6m) domestic government securities, $3m (2022: $2m) domestic equity investments, $1m (2022: $1m) money market funds and $1m (2022: $nil) domestic corporate bonds.

Contributions in the year were $2m (2022: $1m); the charge to System Fund and reimbursables was $1m (2022: $1m) and all other movements were less than $1m (2022: less than $1m).

Key assumptions used in the valuation are the discount rate of 6.0% (2022: 7.0%) and the rate of salary increases of 6.0% (2022: 6.0%). The weighted average duration of liabilities is 11 years (2022: 11 years); estimated future benefit payments are less than $1m in all years.

Defined contribution plans

The Group also operates a number of smaller pension plans outside the UK, the most significant of which is a defined contribution plan in the US.