Annual Report 2015

28. Pension liabilities

 

Main characteristics of the defined benefit pension plans

           

The Group applies several pension plans in different countries, managed according to the local regulations and practice effective in each country. The Group's defined benefit pension schemes are mainly related to Finnish insured voluntary pension plans. The plans are voluntary plans supplementing statutory pensions. Funded plans are insurance policies and the assets of the plan are part of the investment assets of the insurance company. The insurance covers the old-age pension, and the level of benefits provided depends usually on the employee's salary level and the length of service.

           

The Group is exposed to the various risks of the defined benefit plans. As the discount rates applied in measuring the defined benefit obligation are determined based on yields of corporate bonds, the Group is exposed to the related interest-rate risk. Since the majority of plans entail life time benefits to the members, the increase in the life expectancy for pensioners increases the Group's liability. Certain plans are also adjusted to inflation and higher inflation increases the present value of the plan. The majority of the plan assets are not affected by the inflation; consequently higher inflation increases the deficit of the plan.

 

Defined benefit pension liabilities in the balance sheet

           

EUR million

     

2015

2014

Present value of funded obligation

     

77.0

92.3

Fair value of plan assets

     

-65.4

-76.1

Deficit/Surplus

     

11.6

16.3

           

Defined benefit pension expenses in the income statement

           

Income statement

         

EUR million

     

2015

2014

Current service cost

     

0.1

0.3

Interest expense

     

0.3

0.3

Total

     

0.4

0.6

           

Statement of comprehensive income

         

EUR million

     

2015

2014

Actuarial gains (-) and losses (+)

     

-4.6

5.4

           

Changes in the present value of the pension obligation

           

EUR million

     

2015

2014

Obligation at the beginning of the period

     

92.3

80.6

Current service cost

     

0.1

0.3

Interest expense

     

1.6

0.5

Paid benefits

     

-5.7

-5.8

Acquired in business combinations

     

-

0.3

Actuarial gains (-) and losses (+) on changes in actuarial assumptions

-7.4

13.3

Actuarial gains (-) and losses (+) on changes in demographic assumptions

-2.7

-

Experience-based gains (-) and losses (+)

     

-1.0

3.2

Obligation at the end of the period

     

77.0

92.3

           

Changes in the fair value of the plan assets

           

EUR million

     

2015

2014

Fair value of the plan assets at the beginning of the period

     

76.1

69.4

Interest income

     

1.3

0.1

Paid benefits

     

-5.7

-5.8

Employer contributions

     

0.3

1.3

Actual return on plan assets less interest income

     

-6.6

11.0

Fair value of the plan assets at the end of the period

     

65.4

76.1

           

Estimated contributions payable to the defined benefit plans during the next financial period total EUR 0.2 million.

The average duration of the defined benefit plan obligation at the end of the reporting period is 10 years.

           

Key actuarial assumptions and sensitivity analysis

           
       

2015

2014

Discount rate

     

2.25

1.75

Future salary increase assumption

     

0-2

0-2

Future pension increase expectation

     

1.7

2.1

           
   

Change in defined benefit liability

 

Change in

Increase in

Decrease in

EUR million

assumption

assumption

assumption

Discount rate

0.25%

-0.3

-1.77%

0.3

1.85%

Salary increase rate

0.25%

0.0

0.19%

0.0

-0.19%

Pension increase rate

0.25%

1.9

11.83%

-1.8

-11.53%

           

EUR million

 

Increase by one year

Decrease by one year

Life expectancy at birth

 

0.5

4.48%

-0.5

-4.28%

           

The above analysis is based on a change in an assumption while holding all other assumptions constant.