Note 22
Provisions for pensions and similar obligations
Addtech has defined-contribution and defined-benefit pension plans in Sweden, Switzerland and the UK. The plans cover a large number of employees. Subsidiaries in other countries have mainly defined-contribution pension plans. The Parent Company’s data on pensions are reported in accordance with the Swedish Act on Safeguarding Pension Obligations.
DEFINED-CONTRIBUTION PLANS
These plans are mainly retirement pension plans, disability pensions and family pensions. Premiums are paid on an ongoing basis during the year by each Group company and the size of the premium is based on the salary. The pension cost for the period is included in profit or loss.
Obligations for retirement pensions and family pensions for salaried employees in Sweden are secured by insurance in Alecta. According to statement UFR 3 of the Swedish Financial Reporting Board, this is a defined-benefit plan covering multiple employers. For the 2019/2020 financial year, the Company did not have access to information enabling it to report this plan as a defined-benefit plan. Thus the pension plan according to ITP2 and secured by insurance in Alecta is recognised as a defined-contribution plan. The year’s fees for pension insurance with Alecta totalled SEK 31 million (30). Fees for the next financial year are considered to be in line with those for the year reported. The collective consolidation level for Alecta was 133 percent (144) in March 2020. The pension plan according to ITP1 is recognised as a defined-contribution plan.
DEFINED-BENEFIT PLANS
These pension plans primarily comprise retirement pensions. Each employer generally has an obligation to pay a lifelong pension and vesting is based on the number of years of employment. The employee must subscribe to the plan for a certain number of years to be fully entitled to retirement benefits. Each year increases the employee’s entitlement to retirement benefits, which is recognised as pension earned during the period and as an increase in pension obligations. Both funded and unfunded pension plans apply in Sweden, Switzerland and the UK. The funded pension obligations are secured by plan assets that are managed by insurance companies. The Group estimates that SEK 4 million (1) will be paid in 2020/2021 to the funded defined-benefit plans. The total number of commitments of 963 (902) included in the obligation consists of 132 active (71), 488 paid-up policy holders (518) and 343 pensioners (313).
| Group | Parent Company | |||||||
| Pension liability as per balance sheet | 2020-03-31 | 2019-03-31 | 2020-03-31 | 2019-03-31 | ||||
| Pension liability PRI | 270 | 250 | 15 | 15 | ||||
| Other pension obligations | 62 | 10 | – | – | ||||
| Total cost of defined benefit plans | 332 | 260 | 15 | 15 | ||||
| Group | Parent Company | |||||||
| Obligations for defined benefits and the value of plan assets | 2020-03-31 | 2019-03-31 | 2020-03-31 | 2019-03-31 | ||||
| Funded obligations: | ||||||||
| Present value of funded defined benefit obligations | 255 | 53 | – | – | ||||
| Fair value of plan assets | -193 | -43 | – | – | ||||
| Net debt, funded obligations | 62 | 10 | – | – | ||||
| Present value of unfunded defined benefit obligations | 270 | 250 | 15 | 15 | ||||
| Net amount in the balance sheet (obligation +, asset –) | 332 | 260 | 15 | 15 | ||||
| Pension obligations and plan assets per country: | ||||||||
| Sweden | ||||||||
| Pension obligations | 303 | 281 | 15 | 15 | ||||
| Plan assets | -25 | -23 | – | – | ||||
| Net amount in Sweden | 278 | 258 | 15 | 15 | ||||
| Switzerland | ||||||||
| Pension obligations | 200 | – | – | – | ||||
| Plan assets | -149 | – | – | – | ||||
| Net amount in Switzerland | 51 | – | – | – | ||||
| Great Britain | ||||||||
| Pension obligations | 22 | 22 | – | – | ||||
| Plan assets | -19 | -20 | – | – | ||||
| Net amount in Great Britain | 3 | 2 | – | – | ||||
| Net amount in the balance sheet (obligation +, asset –) | 332 | 260 | 15 | 15 | ||||
| Group | Parent Company | |||||||
| Reconciliation of net amount for pensions in the balance sheet | 2019/2020 | 2018/2019 | 2019/2020 | 2018/2019 | ||||
| Opening balance | 260 | 229 | 15 | 15 | ||||
| Cost defined benefit plans | 13 | 8 | 1 | 1 | ||||
| Payment of pension benefits | -7 | -7 | -1 | -1 | ||||
| Funds contributed by employer | -4 | -1 | – | – | ||||
| Acquisition of companies | 12 | 31 | – | – | ||||
| Translation effects | 54 | – | – | – | ||||
| Revaluations | 4 | 0 | – | – | ||||
| Gains and losses from settlements | 0 | 0 | – | – | ||||
| Net amount in balance sheet (obligation +, asset -) | 332 | 260 | 15 | 15 | ||||
| Group | ||||||||
| Changes in the obligation for defined benefit plans recognised in the balance sheet | 2019/2020 | 2018/2019 | ||||||
| Opening balance | 303 | 273 | ||||||
| Pensions earned during the period | 7 | 2 | ||||||
| Pensions earned prior periods, vested | – | 0 | ||||||
| Interest on obligations | 7 | 7 | ||||||
| Benefits paid | -5 | -8 | ||||||
| Funds contributed by employee | 3 | – | ||||||
| Revaluations: | ||||||||
| Gain (-)/loss (+) resulting from demographic assumptions | – | – | ||||||
| Gain (-)/loss (+) resulting from financial assumptions | 20 | 25 | ||||||
| Experienced-based gains (-)/losses (+) | -14 | 5 | ||||||
| Acquisition of companies | 189 | – | ||||||
| Translation effects | 15 | 1 | ||||||
| Gains and losses from settlements | – | -2 | ||||||
| PRESENT VALUE OF PENSIONS OBLIGATIONS | 525 | 303 | ||||||
| Group | ||||||||
| Changes in plan assets | 2019/2020 | 2018/2019 | ||||||
| Opening balance | 43 | 44 | ||||||
| Funds contributed by employer | 4 | 1 | ||||||
| Funds contributed by employee | 3 | – | ||||||
| Benefits paid | 2 | -1 | ||||||
| Interest income recognised in profit or loss | 1 | 1 | ||||||
| Return on plan assets, excluding interest income | -6 | -1 | ||||||
| Acquisition of companies | 135 | – | ||||||
| Translation effects | 11 | 1 | ||||||
| Gains and losses from settlements | – | -2 | ||||||
| Fair value of plan assets | 193 | 43 | ||||||
| Group | Parent Company | |||||||
| Pension costs | 2019/2020 | 2018/2019 | 2019/2020 | 2018/2019 | ||||
| Defined-benefit pension plans | ||||||||
| Cost for pensions earned during the year | 7 | 2 | 1 | – | ||||
| Revenue for pensions earned in prior periods | 0 | – | – | |||||
| Interest on obligations | 7 | 7 | 0 | 1 | ||||
| Interest income recognised in profit or loss | -1 | -1 | – | – | ||||
| Total cost of defined benefit plans | 13 | 8 | 1 | 1 | ||||
| Total cost of defined contribution plans | 157 | 139 | 7 | 7 | ||||
| Social security costs on pension costs | 19 | 17 | 1 | 1 | ||||
| Total cost of benefits after termination of employment | 189 | 164 | 9 | 9 | ||||
| Group | ||||||||
| Allocation of pension costs in the income statement | 2019/2020 | 2018/2019 | ||||||
| Cost of sales | 37 | 32 | ||||||
| Selling and administrative expenses | 146 | 126 | ||||||
| Net financial items | 6 | 6 | ||||||
| Total pension costs | 189 | 164 | ||||||
| 2019/2020 | 2018/2019 | |||||||
| Actuarial assumptions | Sweden | Switzerland | Great Britain | Sweden | Switzerland | Great Britain | ||
| The following material actuarial assumptions were applied in calculating obligations: | ||||||||
| Discount rate, 1 April, % | 2.10 | – | 2.86 | 2.55 | – | 3.08 | ||
| Discount rate, 31 March, % | 1.30 | 0.45 | 2.81 | 2.10 | – | 2.86 | ||
| Future salary increases, % | 2.25 | 1.00 | – | 2.75 | – | – | ||
| Future increases in pensions (change in income base amount), % | 1.20 | 0.00 | 2.61 | 1.80 | – | 3.08 | ||
| Employee turnover, % | 10.0 | – | – | 10.0 | – | – | ||
| Expected ‘G regulation’, % | – | – | – | – | – | – | ||
| Mortality table | DUS14 | BVG 2015 GT | S3PMA/S3PFA | DUS14 | – | S2PMA/S2PFA | ||
| Sensitivity of pension obligations to changes in assumptions | Sweden | Switzerland | Great Britain | Total | ||||
| Defined benefit pension obligations at 31 March 2020 | 303 | 200 | 22 | 525 | ||||
| The discount rate increases by 0.5% | -30 | -18 | -2 | -50 | ||||
| The discount rate decreases by 0.5% | 35 | 19 | 2 | 56 | ||||
| Expected life expectancy increases by 1 year | 15 | – | 1 | 16 | ||||
| Expected life expectancy decreases by 1 year | -15 | – | -1 | -16 | ||||
The discount rate used is equivalent to the interest rate on high-quality corporate bonds or mortgage bonds with a maturity equivalent to the average maturity of the obligation and currency.
For Swedish pension liabilities, the interest rate for Swedish housing bonds is used as a basis and for pension liabilities in Switzerland and the UK, the interest rate for corporate bonds is used. The weighted average maturity for the commitment is around 18 years (18), which is used as a basis on which to determine the discount rate. Future increases in pensions are based on inflation assumptions. In Sweden, the remaining period of employment (life expectancy) is based on DUS 14, statistical tables prepared by Insurance Sweden and Försäkringssällskapet (the Insurance Society), in Switzerland on BVG 2015, and in the UK on S3PA, CMI 2019.
The sensitivity analyses are based on a change in an assumption, while all other assumptions are held constant. The same method, the projected unit credit method, is used to calculate the sensitivity in the defined-benefit obligation as to calculate the pension obligation recognised in the balance sheet.