Annual Report 2022
6.5.17
Employee benefits

See accounting policy M.

Employee benefits
31 December 202231 December 2021
Post-employment benefits pensions2,7223,990
Post-employment benefits other than pensions79
Post-employment benefit obligation2,7303,999
Other long-term employee benefits1214
Total2,7424,013
Costs of post-employment and other long-term employee benefits
20222021
Post-employment benefits pensions-97-80
Post-employment benefits other than pensions--
Total-97-80
Other long term employee benefits-1-
Cost of post-employment and other long-term employee benefits-99-80

The costs of the post-employment benefits pensions relate to the current 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 2,609 million (2021: 3,880 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 costs of the post-employment benefits pensions relate to the DC pension plan of a.s.r., the previous DB plans of a.s.r., plus the DC plans of the other group companies. No regular annual premium contributions are paid to the previous DB plans.

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

In 2022, a.s.r. and the labour unions came to an agreement to add additional funds to the old DB plan for indexation amounting to 240 million, of which 227 million has already been recognised as past service costs in reporting years 2020 and 2021. The additional 13 million, also used for profit sharing, impacted the remeasurements for 12 million and other expenses for 1 million respectively. With the agreement, the current profit sharing in the DB plan will be discontinued as from 31 December 2022.

The recognised expenses for the DC plan in 2022 amounts to 54 million (2021: 50 million).

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 no contributions are paid into the ended DB pension scheme no accrual rate and pensionable salary and minimum franchise is required for this scheme.

  • The 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 2022 amounts to 5 million (2021: 5 million).

Net defined benefit liability

Defined benefit obligation for all the above mentioned plans
20222021
Net defined benefit liability at 1 January3,9904,228
Included in income statement
Interest cost3317
Past service cost193
Other-1-
Total33111
Remeasurement of liabilities included in OCI
Discount rate change-1,222-325
Other assumptions change31-12
Experience adjustments-388
Total-1,194-249
Benefits-107-101
Transfer-2
Net defined benefit liability at 31 December2,7223,990
At 31 December
Defined benefit obligation2,7223,990
Fair value of plan assets--
Net defined benefit liability2,7223,990

Employees account for 20% (2021: 25%) of the DB obligation, 52% (2021: 41%) of the DB obligation relates to former employees currently receiving pension benefits, 25% (2021: 31%) of the DB obligation relates to deferred pensioners and 3% (2021: 3%) of the DB obligation relates to other members.

The discount rate was 3.67% at 31 December 2022 (31 December 2021: 0.90%), resulting in a 1,259 million decrease (2021: 338 million decrease) in the DB obligation.

As per 31 December 2022 the duration of the DB obligation was 14 years (2021: 18 years).

The past service cost of 1 million pre-tax (2021: 93 million) relates to developments in relation to the ended DB plan of a.s.r.

The change in other assumptions amounts to 31 million (2021: -12 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:

Experience adjustments
(in thousands)20222021
Experience adjustments to qualifying investments, gain (loss)--
As % of qualifying investments as at 31 December0.0%0.0%
Experienced adjustments to defined benefit obligation, loss (gain)3,020-87,948
As a % of liabilities as at 31 December-0.1%2.2%

Assumptions

The principal actuarial assumptions and parameters at year-end
20222021
Discount rate3.7%0.9%
Indexation % employeesn.a.2.2%
Indexation % former employeesn.a.2.2%
Mortality (years)19.919.7

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 2022’ is used, in combination with a.s.r. specific experience factors for the pension portfolio;

  • As from 2022 the indexation amount in the DB obligation is no longer derived from the indexation parameter and estimated period of indexation; instead, the fair values of the separate accounts to fund future indexation are added to the DB obligation.

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:

Sensitivity of actuarial assumptions
IncreaseDecrease
Discount rate (1% movement)-287360
Future mortality (1 year movement)-6968

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:

Breakdown of global investments held by a.s.r. life
31 December 202231 December 2021
Equities18.0%17.9%
Fixed-interest securities73.2%74.4%
Real estate6.3%5.3%
Cash0.3%0.2%
Other2.1%2.2%

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 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 2022, the fair value of these assets amounted to 2,424 million (2021: 2,651 million) including the separate accounts to fund future inflation indexation amounting to 372 million (2021: 192 million), which partly comprise the agreed additional funds in 2022. 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. As of 1 January 2023, the non-qualifying plan assets also cease to be allocated to the a.s.r. DB plan as all profit sharing has ended and the assets will be included in the general account investments going forward.

As the assets 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 2022 amounted to 33 million (2021: 81 million), which includes the investment income on the separate account to fund future inflation indexation amounting to 5 million (2021: 14 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.

Changes in the defined benefit obligation
20222021
Defined benefit obligation at 1 january910
Included in income statement
Other--
Total00
Remeasurement of liabilities included in OCI
Discount rate change-1-
Other assumptions change--
Total-10
Benefits-1-1
Defined benefit obligation at 31 December79

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 the DB obligation:

Experience adjustments to defined benefit obligation
(in thousands)20222021
Experience adjustments to defined benefit obligation, loss (gain)1,272385
As a % of liabilities as at 31 December17.8%4.2%
Principal actuarial assumptions and parameters at year-end
20222021
Discount rate3.7%0.6%

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 2022’ 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 (2021: 1 million increase) or 1 million decrease (2021: 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.

Changes in other long-term employee benefits
20222021
Net liability as at 1 January1415
Total expenses-2-
Actuarial gains and losses1-
Other-1-1
Net liability as at 31 December1214
Underlying assumptions
31 December 202231 December 2021
Discount rate3.7%0.5%
Salary increases3.4%2.2%
Expected remaining service years8.28.1