See accounting policy M.

The costs of the post-employment benefits pensions relate to the new DC pension plan of a.s.r., the previous DB plans of a.s.r., plus the DC plans of the other group companies.

An amount of € 3,878 million (2020: € 4,127 million) of the employee benefits is expected to be settled more than twelve months after the balance sheet date.

6.5.17.1 Post-employment benefits pensions

a.s.r. has a number of DC and DB post-employment benefit plans for its employees and former employees. The majority of employees are formally employed by a.s.r. A limited amount of employees are employed by other group companies. The pension plans of other group companies are disclosed in a separate section in this chapter.

a.s.r. life, an insurance company and a group entity, is the insurer of the majority of the post-employment benefit plans, being both the DC plans as well as the DB plans. As this company holds the separated investments that are meant to cover the employee benefit obligation for the DB plans, they do not qualify as plan assets in accordance with IAS 19 and are therefore included in financial assets.

a.s.r. employees

The post-employment DB plan of a.s.r. has ended as per 31 December 2020. A new DC plan has been introduced and started from 1 January 2021. The net defined benefit obligation will continue to exist, but no further regular annual premium contributions will be paid to the plan. The recognised expenses for the DC plan in 2021 amounts to € 50 million.

The new DC plan has two components with defined benefit elements with a marginal impact; survivors' pension and the option to buy a guaranteed income.

In 2020, as a result of the agreed change in the a.s.r. pension scheme in 2020, the defined benefit obligations for all the DB plans have been recalculated which resulted in a past service cost of € 56 million, presented for € 59 million as part of the other expenses and for € 3 million as part of other income in the income statement.

The past service cost presented in 2021 relates to developments in relation to the ended DB plan (ended 31 December 2020) of a.s.r. This results in a past service cost of € 93 million pre-tax in 2021 (2020: € 59 million).

The former employees of Brand New Day IORP became employees of a.s.r. and subsequently participants in the a.s.r. post-employment DC plan as of 1 April 2021.

All pension build up for existing and new employees as of 1 January 2021 are included in the post employment DC plans. All employees who commenced service between 1 January 2006 and 31 December 2020 are included in one post-employment DB plan (‘Basic plan’). All other employees remain active within the existing plan at the date of first employment. Previous plans for former employees are also still active.

The post-employment DB en DC plans for employees that are employed by a.s.r. are insured by a.s.r. life.

The methods and techniques used to calculate the DB obligations are based on IAS 19 requirements and calculated by an independent actuary.

The benefits under these plans are dependent on factors such as years of service and compensation. Pension obligations are determined using mortality tables, the rate of employee turnover, wage drift and economic assumptions for factors such as inflation, and the discount rate.

As per 31 December 2020 the contribution to the DB pension scheme ended, therefore no accrual rate (2020: 1.875%) and pensionable salary (2020: € 103,780) and minimum franchise is required for this scheme.

• The 2020 DB pension scheme had a retirement age of 68 years.

• The DB scheme was based on average-salary pension; and

• Future inflation indexation is conditional.

Other group companies employees

The other group companies, which are entities operating in the Distribution and Services segment, have DC plans, insured with a.s.r. life. The recognised expenses for these DC plans in 2021 amounts to € 5 million (2020: € 3 million).

Net defined benefit liability

Employees account for 25% (2020: 26%) of the DB obligation, 41% (2020: 39%) of the DB obligation relates to former employees currently receiving pension benefits, 31% (2020: 32%) of the DB obligation relates to deferred pensioners and 3% (2020: 3%) of the DB obligation relates to other members.

The discount rate was 0.90% at 31 December 2021 (31 December 2020: 0.43%), resulting in a € 338 million decrease (2020: € 459 million increase) in the DB obligation.

As per 31 December 2020 the duration of the DB obligation was 18 years (2020: 19 years).

The change in other assumptions amounts to € -12 million (2020: € -99 million) primarily due to a change in indexation percentage of former employees.

Experience adjustments are actuarial gains and losses that have arisen due to differences between actuarial assumptions. The following table provides information about experience adjustments with respect to qualifying plan assets and the DB obligation:

Assumptions

In the calculation of the DB obligation the:

• Discount rate is based on an internal curve for high quality corporate bonds;

• Most recent mortality table ‘AG Prognosetafel 2020’ is used, in combination with a.s.r. specific experience factors for the pension portfolio;

• The period of indexation is based on the expected duration of the separate account to fund the future inflation indexation.

The sensitivity of the above actuarial assumptions to feasible possible changes at the reporting date to one of the relevant actuarial assumptions whilst other assumption remain constant, would have affected the DB obligation by the amounts shown below:

Non-qualifying plan assets

The portfolio of global investments (non-qualifying assets) held by a.s.r. life to cover the employee benefit expense of the DB plans can be broken down as follows:

For the non-qualifying assets backing the post-employment benefit plans, a.s.r. has drawn up general guidelines for the asset mix based on criteria such as geographical location and ratings. To ensure the investment guidelines remain in line with the conditions of the post-employment benefit obligations, a.s.r. regularly performs Asset Liability Management (ALM) studies. Transactions in the non-qualifying assets are done within the guidelines. As the post-employment benefit plans are a liability on group level, the underlying insurance and market risks are in scope of a.s.r.’s risk policies (see chapter 6.8). The overall interest-rate risk of the group is managed using interest-rate swaps and swaptions. a.s.r. life manages the interest rate risk through an overlay interest hedging strategy using swaps and swaptions for the company as a whole (see chapter 6.8.3). The swaps and swaptions are not specifically allocated to the a.s.r. post-employment benefit plans. Therefore the (un)realised gains and losses from swaps and swaptions as a whole are accounted for in liabilities arising from insurance contracts, in accordance with the shadow accounting policy, whereas the impact of changes in interest rates on the provisioning for employee benefits based on IAS19 is part of actuarial gains and losses that are recognised in equity (see chapter 6.5.13.3).

The non-qualifying assets, which are managed by a group company, are not presented as part of the net DB obligation. At year-end 2021, the fair value of these assets amounted to € 2,651 million (2020: € 2,664 million), which includes the separate account to fund future inflation indexation amounting to € 192 million (2020: € 242 million). As mentioned above, the swaps and swaptions have not been allocated directly to the post-employment benefit obligations; neither are they included as part of the fair value of the non-qualifying assets managed by the group company.

Under IFRS, assets managed by insurance companies that form part of the group do not qualify as qualifying assets. Investment income from these assets has therefore not been included in the above figures but is recognised as investment income separately. Actual investment returns for 2021 amounted to € 81 million (2020: € 58 million), which includes the investment income on the separate account to fund future inflation indexation amounting to € 14 million (2020: € 1 million). These returns have been recognised in investment income (see chapter 6.6.2).

The separate account to fund future inflation indexation is utilised to fund the future inflation indexation for the employees and former employees included in the a.s.r. post-employment benefit plans. As such this has been included in the assumption used in calculating the DB obligation.

6.5.17.2 Post-employment benefits other than pensions

The other post-employment benefits plans consist of personnel arrangements for financial products (such as mortgages and health insurance), which remain in place after retirement.

Experience adjustments are actuarial gains and losses that have arisen due to differences between actuarial assumptions. The following table provides information about experience adjustments with respect to qualifying plan assets and the DB obligation:

In accordance with a.s.r.’s policy, discounts on employee mortgages have been fixated in amounts granted on the reference date December 2017.

In the calculation of the DB obligation the:

• Discount rate is based on an internal curve for high quality corporate bonds;

• Most recent mortality table ‘AG Prognosetafel 2020’ is used, in combination with a.s.r. specific experience factors for the pension portfolio;

The sensitivity of the above actuarial assumptions to feasible possible changes at the reporting date to one of the relevant actuarial assumptions whilst other assumption remain constant, would have affected the DB obligation by the amounts of € 1 million increase (2020: € 1 million increase) or € 1 million decrease (2020: € 1 million decrease) as a result of a movement of the discount rate by 1%.

6.5.17.3 Other long-term employee benefits

Other long-term employee benefits consist of the employer’s share of liabilities arising from long-term services, such as jubilee benefits.