32. Provisions for pensions and similar commitments

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€ million

31/12/2011

31/12/2012

Pension provisions (employer´s commitments)

568

560

Provisions for indirect commitments

301

326

Provisions for severance benefits

81

80

Provisions for company pension upgrades

5

5

Provisions for company pension plans

955

971

Provisions for commitments similar to pensions

73

76

 

1,028

1,047

Provisions for company pension plans consist, for the most part, of defined benefit plans directly from the employer (employer’s commitments) and defined benefit plans from external providers (benevolent funds in Germany and international pension funds). The external providers’ assets serve exclusively to finance the pension commitments and qualify as plan assets pursuant to IAS 19 (Employee Benefits). The benefits under the different plans are based on performance and length of service. Furthermore, the length-of-service benefits are provided on the basis of fixed amounts.

The most important pension plans are described in the following.

Germany

The essential plans foresee monthly pension benefits. The amounts are either fixed or depend on the length of service. In individual cases, state pension insurance entitlements are to be charged against these entitlements. Entitlements to widow’s and widower’s pensions also apply.

Netherlands

A defined-benefit pension plan exists in the Netherlands which foresees pension payments as well as invalidity and death benefits. The size of the benefits depends on the pensionable salary per year of service.

United Kingdom

In July 2012, METRO GROUP sold its cash & carry business in the United Kingdom to Booker Group PLC Pension commitments were not part of the sale. Since the date of the sale, only vested benefits and current pensions from service years at METRO GROUP exist. In accordance with legal stipulations, the vested interests must be adjusted for inflation.

Italy

In Italy, employees receive payments upon termination of their employment relationship, irrespective of the reasons for termination. A pension reform law that took effect on 1 January 2007 is designed to promote company and individual retirement provisions. Companies with more than 50 employees are required to transfer employee entitlements incurred after the enforcement date to the newly established state fund.

Belgium

There are both retirement pensions as well as capital commitments whose size depends on the length of service and income. In addition, benefits are paid to employees aged 58 and older who become unemployed.

The above pension commitments are valued on the basis of actuarial calculations in accordance with IAS 19 using the legal, economic and tax circumstances of each country.

The following average assumptions are used in the actuarial valuation:

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31/12/2011

31/12/2012

 

 

 

 

 

 

 

 

 

%

Euro-
zone

Ger-many

Nether-
lands

United King-
dom

Euro-
zone

Ger-many

Nether-
lands

United King-
dom

Actuarial interest rate

5.20

5.13

5.70

5.10

3.40

3.35

3.60

4.50

Inflation rate

1.98

2.00

2.00

2.20

2.00

2.00

2.00

1.90

Pension trend

1.90

2.00

1.35

2.20

1.89

2.00

1.40

2.00

Income trend

2.29

2.15

2.50

2.21

2.09

2.50

Expected return on plan assets

4.39

4.36

4.60

5.50

The employee turnover rate is determined separately for each business, taking age/length of service into account. The average employee turnover rate in Germany is 3.10 percent (previous year: 3.10 percent).

The actuarial valuations are based on country-specific mortality tables. Calculations for the German Group companies are based on the 2005 tables from Prof. Dr Klaus Heubeck, which have been modified by new data from the German state pension insurance.

The fair value of plan assets by asset category can be broken down as follows:

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%

31/12/2011

31/12/2012

Fixed-interest securities

51

49

Shares, funds

18

21

Real estate

18

17

Other assets

13

13

 

100

100

A revised version of IAS 19 (see chapter “Notes to the Group accounting principles and methods”) applies to financial years starting on or after 1 January 2013. On change is that only net interest expenses corresponding to the actuarial interest on the formed provision will be determined in future. As a result, the expected income from plan assets no longer represents an assumption needed to determine annual expenses and is therefore no longer reported as of 31 December 2012.

Plan assets include properties used by METRO GROUP in the amount of €137 million (previous year: €137 million).

The actual gain from plan assets amounted to €89 million in the financial year (previous year: €45 million).

The financing status that results from the balance of the present value of defined benefit obligations and fair value of plan assets has developed as follows over the past 5 years:

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€ million

31/12/
2008

31/12/
2009

31/12/
2010

31/12/
2011

31/12/
2012

Net present value (DBO)

1,827

1,944

2,026

2,008

2,472

Plan assets

–845

–870

–936

–977

–1,029

Financing status

982

1,074

1,090

1,031

1,443

Experience-based adjustment of plan liabilities

–3

2

–13

–3

–5

Experience-based adjustment of plan assets

–82

13

38

2

48

In the financial year 2013 (9 months), payments to external pension providers are expected to amount to €19 million.

Changes in the present value of defined benefit obligations and plan assets of external pension providers are shown in the chart below:

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€ million

2011

2012

Net present value (DBO)

 

 

As of 1 January

2,026

2,008

Interest expenses

98

99

Service cost

37

37

Past service cost

–5

–11

Curtailments/settlements

0

–1

Plan costs

0

0

Pension payments

–125

–128

Actuarial gains (-)/losses (+)

–29

468

Change in consolidation group

0

–5

Currency effects

6

5

As of 31 December

2,008

2,472

 

 

 

Change in plan assets

 

 

As of 1 January

936

977

Expected return on plan assets

43

41

Plan costs

–1

–1

Pension payments

–77

–78

Employer contribution

55

28

Contributions from plan participants

12

14

Actuarial gains (+)/losses (-)

2

48

Change in consolidation group

0

–5

Currency effects

7

5

As of 31 December

977

1,029

 

 

 

Financing status

 

 

Net present value (DBO), not fund-financed

738

899

Net present value (DBO), wholly or partly fund-financed

1,270

1,573

Subtotal

2,008

2,472

Fair value of plan assets

–977

–1,029

As of 31 December

1,031

1,443

Actuarial gains (+)/losses (-) not yet considered

–203

–616

Past service cost

–6

–1

Account not shown as an asset due to definition of IAS 19.58 (b)

0

0

Recognised reimbursement claims pursuant to IAS 19.104A

0

0

Commitments measured based on local criteria

2

2

Recognised assets pursuant to IAS 19.58

131

143

Provisions for company pensions as of 31 December

955

971

Provisions for company pension plans in the amount of €971 million (previous year: €955 million) are netted against assets for indirect pension plans, particularly in the United Kingdom, the Netherlands and Belgium, of €143 million (previous year: €131 million).

The pension expenses of the direct and indirect company pension plans can be broken down as follows:

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€ million

2011

2012

1

Netted against employees’ contributions

Interest expense on net present value (DBO)

98

99

Expected return on plan assets

–43

–41

Recognised actuarial gains (-)/losses (+)

11

7

Service cost1

28

25

Curtailment

0

–1

Asset limitation

0

0

Past service cost

–4

–6

 

90

83

In addition to expenses from defined benefit pension commitments, expenses for payments to external pension providers relating to defined contribution pension commitments of €53 million (previous year: €50 million) were considered in the financial year 2012.

The provisions for commitments similar to pensions essentially comprise commitments from employment anniversary allowances, death benefits and pre-retirement part-time plans. Provisions amounting to €18 million (previous year: €21 million) were formed for commitments from pre-retirement part-time plans. The corresponding expenses amount to €4 million (previous year: €3 million).

The commitments are valued on the basis of actuarial expert opinions. In principle, the parameters used are identical to those employed in the company pension plan.