Note 23 Pensions

Note 23 Pensions

PostNord’s pension plans are described in Note 1, Accounting Principles (page 104). There are both defined benefit and defined contribution plans. Some personnel categories are eligible for pensions at an earlier age based on specific provisions in connection with incorporation. Posten’s Pension Fund safeguards the pension commitments of Posten AB, Posten Meddelande AB and PostNord Logistics AB. See the Assets under Management section and Note 30, Transactions with Associated Parties (page 130) for information concerning dealings between the group and Posten’s Pension Fund. Posten’s Pension Fund is regulated by the Law on Safeguarding of Pension Commitments (1967:531). The Fund is supervised by Stockholm County Council and the Financial Supervisory Authority. Posten’s Insurance Association is subject to the Law on Friendly Societies (1972:262) and is supervised by the Financial Supervisory Authority. Accordingly, requirements for Posten’s Insurance Association require maintaining an asset base exceeding the necessary solvency margin. Norway’s pension plans are regulated by the Law on Company Pension plans in France are regulated through graphic industry collective agreements.

Balance sheet items for defined benefit pension plans

Pension commitments and plan assets


Dec 31, 2013 Dec 31, 2012
Pension commitments and plan assets, net amount, SEKm Funded pension plans Unfunded pension plans, future unconditional pension benefits Unfunded pension plans, future conditional pension benefits Total Funded pension plans Unfunded pension plans, future unconditional pension benefits Unfunded pension plans, future conditional pension benefits Total
Present value of defined benefit commitments 15,573 1,764 747 18,084 16,455 1,866 781 19,102
Fair value of plan assets –17,571

–17,571 –16,408

–16,408
Net commitment –1,998 1,764 747 513 47 1,866 781 2,694
Unreported actuarial gains (+) and losses (–) –373 –6 181 –198 147 10 172 329
Net indebtedness on balance sheet –2,371 1,758 928 315 194 1,876 953 3,023
Reference:







Note 24, Other Provisions

928 928

953 953
Balance sheet, Pension provisions –1383 1,758
375 1,157 1,876
3,033
Note 16, Long-term Receivables –988

–988 –963

–963
Net amount attributable to plans in the following countries, SEKm







Sweden


309


3,016
France


5


6
Norway


1


1
Total


315


3,023

When the value of assets under management exceeds the present value of the pension calculation, this results in an asset for the group (see section on Long-term Receivables). The group deems that the value of the asset exceeds the present value of future refunds from the plan and reduced future payments to the plan.


Dec 31, 2013 Dec 31, 2012
Specification of present value of defined benefit commitments, SEKm Funded pension plans Unfunded pension plans, future unconditional pension benefits Unfunded pension plans, future conditional pension benefits Total Funded pension plans Unfunded pension plans, future unconditional pension benefits Unfunded pension plans, future conditional pension benefits Total
Beginning balance 16,455 1,866 781 19,102 15,843 1,589 808 18,240
Costs, employment service during current year 313 7 23 343 377 7 24 408
Costs, employment service during previous year 0 0 0 0 0 0 0 0
Interest expense 549 64 27 640 589 60 32 681
Early retirement pensions 0 121 0 121 0 242 0 242
Payment of benefits –810 –328 0 –1,138 –895 –259 0 –1,154
Curtailments and settlements 0 0 0 0 0 0 0 0
Transfers 0 104 –104 0 –95 184 –90 –1
Actuarial gains (–) and losses (+) – change in financial assumptions –1,134 –85 –18 –1,237 895 69 16 980
Actuarial gains (–) and losses (+) – change in demographic assumptions 0 0 0 0 0 0 0 0
Actuarial gains (–) and losses (+) – based on experience 200 15 37 252 –259 –26 –9 –294
Translation differencies foreign pension plans 0 0 0 0 0 0 0 0
Ending balance 15,573 1,764 746 18,083 16,455 1,866 781 19,102
Plan’s weighted duration, years 13,4 10,8 6,1 12,8 13,8 11,1 6,3 13,2

The group anticipates making payments amounting to SEK 1,042m during 2014 related to defined benefits plans.

Specification of fair value of plan assets, SEKm 2013 2012
Beginning balance 16,408 15,967
Interest income 551 594
Funds paid by employer 194 573
Compensation –111 –360
Payment of benefits –68 –59
Curtailments and settlements 0 0
Actual return above (+) and below (–) interest income 597 –307
Exchange rate differences in foreign plans 0 0
Ending balance 17,571 16,408
Return on plan assets, SEKm 2013 2012
Actual return on plan assets 1,148 287
Interest income 551 594
Actual return above (+) and below (–) interest income on assets under management during the period 597 –307

Provisions, estimated future conditional pensions

PostNord is responsible for future conditional pension benefits under the transition regulations for Swedish subsidiaries. The transition regulations apply to certain employees who are entitled to retire at the age of 60 or 63. To qualify, employees must have reached 28 years of age by January 1, 1992 and have held the same position since then. The total commitment, calculated according to the Act on Safeguarding of Pension Commitments, totaled SEK 2,720m (2,698) as of December 31, 2013. Experience demonstrates that an average of 25% utilizes the transition regulations, and the provision is determined at that percentage of this commitment. Special payroll tax is taken into consideration, and the liability totals SEK 928m (1,024) including special payroll tax. For accounting in accordance with IAS 19 see unfunded pension plans, future conditional pension benefits in the tables in this Note, and future conditional pension benefits in Note 24, Other Provisions (page 124).

Final responsibility provision

PostNord assumed “final responsibility” for an obligation assumed in connection with its conversion into a corporation. Previously, this commitment was reported as a contingent liability. Provisions were made for the commitment in conjunction with the adoption of IAS 19. Based on available information, the commitment was estimated at SEK 118m (112) as of December 31, 2013, and includes a provision for special payroll tax. The commitment is included in the balance for unfunded pension plans, future conditional pension benefits in the table in this Note, and future conditional pension benefits in Note 24, Other Provisions (page 124).

Index-linked responsibility

In 2000, pension commitments previously safeguarded by Posten’s Pension Fund were redeemed through the acquisition of insurance policies. As of December 31, 2013 the net present value of these was SEK 37m (51). PostNord bears index-linking and gross coordination responsibility for these pension commitments.


2013 2012
Expenses and income for defined benefit and defined contribution pension plans, SEKm Funded pension plans Unfunded pension plans, future unconditional pension benefits Unfunded pension plans, future conditional pension benefits Total Funded pension plans Unfunded pension plans, future unconditional pension benefits Unfunded pension plans, future conditional pension benefits Total
Costs, employment service during current year 313 7 23 343 377 7 24 408
Costs, employment service during previous year 0 0 0 0 0 0 0 0
Interest expense (+) and interest income (–) –2 64 27 89 –5 60 32 87
Early retirement pensions 0 121 0 121 0 242 0 242
Curtailments and settlements 0 0 0 0 0 0 0 0
Total defined benefit pensions 311 192 50 553 372 309 56 737
Defined contribution plans


1,053


1,001
Deducted as financial items


–90


–87
Utilization of restructuring provisions, costs of early retirement pensions


–33


–123
Other defined benefit pension expenses


15


22
Total pension expenses


1,498


1,550

Actuarial assumptions

The actuarial valuations of PostNord’s defined benefit pension commitments and pension expenses are based on the following assumptions. These assumptions are provided as a total average value for each pension plan. A change in any of these key assumptions may have a significant impact on projected pension commitments, funding requirements and annual pension costs.

Actuarial assumptions, % Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Discount rate 4,00 3,50 3,90
Future annual wage increases 2,60 2,60 2,60
Change in income base amount 3,00 3,00 3,00
Inflation 2,00 2,00 2,00
Personnel turn over 4,50 4,50 4,50
Life expectancy FFFS 2007:31 FFFS 2007:31 FFFS 2007:31
for a 65-yr-old male (born 1950) 20,9 20,9 20,9
for a 65-yr-old male (born 1970) 22,7 22,7 22,7

The costs for 2013 are based on actuarial assumptions adopted at the beginning of 2013. At the end of 2013, PostNord adopted assumptions applicable to calculation of the results as of December 31, 2013. These actuarial assumptions are also used in the forecast for 2014 costs. In setting the assumptions the long-term, mutual compatibility of all assumptions used in the appraisal was taken into account.

The discount rate is determined in accordance with IAS 19 with reference to prime corporate bonds traded in a functioning corporate bond market as per IFRS’s view by referring to the Swedish mortgage bond market. Group Management thus takes the view that the discount rate applied reflects the time value of the money and provides a reasonable present value of Posten’s pension commitments. Future annual pay increases reflect expected future salary increases as a compound of inflation, seniority and promotion. The income base amount is set annually by the Swedish government and is used, among other things, to set a cap on pensionable income in the social security system. With respect to inflation, the group has chosen to use the Swedish Central Bank’s inflation targets. Personnel turnover is an aggregate of expected future business development, increases in real wages and productivity growth needed to maintain profitability, as well as consideration of personnel turnover in recent years. The average remaining employment service factor is estimated based on employees’ current age breakdown. Life expectancy assumptions are based on the Swedish Supervisory Authority’s guidelines FFFS 2007:31 (FFFS 2007:31).

Alecta

Retirement and family pension plans for salaried employees in Sweden can be insured by a policy underwritten by Alecta. Only a few companies within the group utilize insurance as a safeguarding solution. According to a pronouncement by the Swedish Financial Reporting Board, UFR 3, defined benefit pension commitments secured by Alecta insurance are considered to be a single pension plan that encompasses several employers. For fiscal year 2013, the company has not had access to information enabling the reporting of this plan as a defined benefit pension plan. The ITP pension plan insured by Alecta is therefore reported as a defined contribution plan. Pension insurance fees related to Alecta totaled SEK 8.3m (7.2). Anticipated fees for 2014 total SEK 8.3m. Alecta’s surplus can be distributed to policyholders and/or the insured. As of December 2013, Alecta’s surplus in the form of the collective consolidation level was 148 (129)%. The collective consolidation level equals the market value of Alecta’s assets divided by total insurance commitments and calculated in accordance with Alecta’s actuarial assumptions, which do not comply with IAS19.

Assets under management

The greatest portion of assets under management is included in Posten’s Pension Fund. Other assets under management consist of assets in Posten’s Insurance Association, pension insurance underwritten by Skandia and assets under management related to Norwegian pension plans. Total assets under management total SEK 17,571m (16,408).

The Pension Fund’s activities are regulated by an investment policy established by the Fund’s board of directors. The capital transferred to the Fund by PostNord shall generate a reasonable return, the achievement of which requires a certain amount of risk-taking. To prevent this risk from becoming too great, the Fund diversifies investments among different asset classes.

The Fund’s allocation strategy is based on an Asset Liability Management study. The forecasted pension liability is set against the assets’ expected return, risk and historical correlations to determine appropriate asset allocation and risk level.

Asset allocation and Fund management shall effectuate the achievement of the long-term performance target at a justifiable and reasonable level of risk. The realized return from fund management varies between years due to a range of external factors. The performance target shall therefore be considered a goal for realized return over a long period of time.

The Fund aims to achieve good diversification between and within asset classes based on historical risk-adjusted return and correlations, such as expected risk-adjusted return. Asset risks are reduced through diversification. Allocation among different asset classes is determined at intervals for purposes of flexibility.

58% of the assets are traded on an active market. Fund assets at year-end 2013 and 2012 were distributed as follows:

Posten’s Pension Fund assets per class, market value, SEKm 2013 2012
Dec 31 % Dec 31 %
Interest-bearing securities 1) 1,911 12 2,991 21
High Yield 1,197 7 1,244 8
Liquidity 2) 1,091 7 769 5
Hedge funds 3,430 21 3,157 21
Infrastructure 807 5 871 6
Property 1,720 11 1,546 10
Swedish stocks 1,243 8 969 7
Foreign stocks 3,835 24 2,197 15
Commodities

368 2
Private equity 759 5 694 5
Total assets under management in Posten’s Pension Fund 15,993
14,806

1) Includes accrued interest.

2) Includes classes of assets that were classified as Other Assets in previous years.

Other fund assets, market value, SEKm Dec 31, 2013 Dec 31, 2012
Posten’s insurance associaton 1,536 1,544
Skandia pension insurance 42 58
Total other assets under management 1,578 1,602

Eighteen percent of the assets in Posten’s Insurance Association are traded on an active market. The asset allocation of Posten’s Pension Fund as of December 31, 2013 is presented in the table above. The overriding objective of the Fund is to manage the assets so as to best serve group’s pension commitments, the funds for which have been entrusted to the Fund. The composition of and return on the assets should serve as reassurance that the group can meet the pension commitments safeguarded by the Fund.

Sensitivity analysis

At year-end 2013, PostNord had funded pension commitments of SEK 15,573m (16,455) and assets under management of SEK 17,571m (16,408). In addition to funded pension commitments, pension liabilities are allocated as future unconditional pension commitments of SEK 1,764m (1,866) and future conditional pension commitments of SEK 746m (781). The group’s pension commitments are valued based on the above-referenced actuarial assumptions; assets under management are assessed at fair value.

A provision of 25% of total commitments is made pursuant to the transition regulations. This number is based on the historical degree to which rights under the regulations are exercised. The special payroll tax has also been taken into account. Change in the commitments pursuant to the transition regulations and due to different levels of exercise of rights is reported as income or is expensed. See the table below for the effect of changed levels of exercise of rights under the transition regulations.


Change Impact on profit Impact on balance sheet items and other comprehensive income
Sensitivity analysis, SEKm
Personnel expense (EBIT) Net financial items Impact on pension liabilities Impact on market value of assets Net impact on other comprehensive income
Actuarial commitments





Change in discount rate and expected return on fund assets +0,1% percentage point 4 9 –230
–180

–0,1% percentage point –6 –10 231
180
Change in actual return on fund assets +0,1% percentage point 0 1
18 14

–0,1% percentage point 0 –1
–18 –14
Change in salaries and wages +0,5% percentage point –16 –12 286
223

–0,5% percentage point 17 11 –297
–232
Change in income base amount +0,5% percentage point 5 3 –90
–71

–0,5% percentage point –5 –4 92
71
Change av inflation +0,5% percentage point –15 –40 994
775

–0,5% percentage point 16 37 –943
–736
Length of life +1 year –8 –24 590
460

–1 year 8 24 –600
–468
Level of exercise of rights under transition regulations





Change in level of exercise of rights under transition regulations +5,0% percentage point –4 –5 120
93

–5,0% percentage point 4 5 –132
–103