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29. Pension liabilities

 

Main characteristics of the reported 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 final average pay 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 on the employee's salary at retirement age 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. The 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


2013 2012
Present value of funded obligations


78.0 74.7
Fair value of plan assets


-66.8 -66.5
Deficit/Surplus


11.3 8.3






           

Defined benefit pension expenses in the income statement and statement of comprehensive income:

 

Income statement




EUR million


2013 2012
Current service costs


0.2 1.1
Interest costs


0.2 0.3
Total


0.5 1.4






Statement of comprehensive income




EUR million


2013 2012
Actuarial gains (-) and losses (+)


5.0 2.9






Changes in the present value of the pension obligation:






EUR million


2013 2012
Obligation at the beginning of the period


74.7 76.2
Current service costs


0.2 0.3
Interest costs


0.4 0.5
Curtailments


-0.2 -3.9
Paid benefits


-1.8 0.0
Actuarial gains (-) and losses (+) on changes in actuarial assumptions


2.3 2.6
Experience-based adjustments


2.3 -1.0
Obligation at the end of the period


78.0 74.7






           

Changes in the fair value of the plan assets:

 

EUR million


2013 2012
Fair value of the plan assets at the beginning of the period


66.5 67.9
Return on plan assets


0.2 0.3
Paid benefits


-1.8 0.0
Employer contributions


2.5 2.1
Curtailment


-0.2 -1.7
Actuarial gains and losses


-0.4 -2.0
Fair value of the plan assets at the end of the period


66.8 66.5






           

Estimated contributions payable to the defined benefit plans during the next financial period total EUR 2.2 million.

The average duration of the defined benefit plan obligation at the end of the reporting period is 11.2 years.

 

Key actuarial assumptions were as follows:

 





2013 2012
Discount rate


3.25 3.5
Expected return on plan assets


3.25 3.5–4.3
Future salary increase assumption


0–2 0–2.5
Future pension increase expectation


2.1 2.1








Change in DBO

Change in Increase in Decrease in

assumption assumption assumption
Discount rate 0.25% -276,464 -2.46% 269,643 2.40%
Inflation 0.25% 441,151 3.93% -404,617 -3.60%
Salary increase rate 0.25% 33,507 0.30% -33,097 -0.29%
Pension increase rate 0.25% 407,644 3.63% -397,082 -3.54%








Increase by one year Decrease by one year
Life expectancy at birth
455,637 4.06% -437,752 -3.90%






           

The above analysis is based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation using the above assumptions the same method has been applied as when measuring the defined benefit obligation on the statement of financial position.