Year 2017

18. 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 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

   

2017

2016

2015

Present value of funded obligation

   

76.5

80.2

77.0

Fair value of plan assets

   

-64.7

-68.3

-65.4

Deficit

   

11.8

11.9

11.6

           

Defined benefit pension expenses in the income statement

Income statement

         

EUR million

   

2017

2016

2015

Current service cost

   

0.0

0.0

0.1

Interest expense

   

0.1

0.3

0.3

Total

   

0.1

0.3

0.4

           

Statement of comprehensive income

         

EUR million

   

2017

2016

2015

Remeasurement gains (+) and losses (-)

   

-0.5

0.0

4.6

           

Changes in the present value of the pension obligation

EUR million

   

2017

2016

2015

Obligation at the beginning of the period

   

80.2

77.0

92.3

Current service cost

   

0.0

0.0

0.1

Interest expense

   

0.8

1.7

1.6

Paid benefits

   

-5.2

-5.3

-5.7

Disposed of in business combinations

   

-0.2

-

-

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

2.5

8.4

-7.4

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

0.0

0.0

-2.7

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

   

-1.7

-1.5

-1.0

Obligation at the end of the period

   

76.5

80.2

77.0

           

Changes in the fair value of the plan assets

EUR million

   

2017

2016

2015

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

68.3

65.4

76.1

Interest income

   

0.7

1.4

1.3

Paid benefits

   

-5.2

-5.3

-5.7

Employer contributions

   

0.5

0.1

0.3

Actual return on plan assets less interest income

   

0.4

6.8

-6.6

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

   

64.7

68.3

65.4

           

Estimated contributions payable to the defined benefit plans during the next financial period total EUR 0.5 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

     

2017

2016

2015

Discount rate

   

0,84–1,45

1,01–1,51

2.25

Future pension increase expectation

   

1,8–2,1

1,7–1,9

1.7

           
   

Change in defined benefit liability

 

Change in

Increase in

Decrease in

EUR million

assumption

assumption

assumption

Discount rate

0.25%

-0.5

-4.3%

0.8

6.5%

Pension increase rate

0.25%

1.7

14.5%

-1.6

-14.0%

           

EUR million

 

Increase by one year

Decrease by one year

Life expectancy at birth

 

1.1

9.0%

-1.0

-8.4%

           

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