6.23 Employee benefits

Movement in the liability for defined-benefit plans and long-service payments

x € 1,000

Liability

Fair value of assets

Net liabilities
relating to defined-benefit rights and long-service payments

2022

2021

2022

2021

2022

2021

Balance at 1 January

230,241

248,486

205,145

232,120

25,096

16,366

Recognised in profit or loss

Service cost

393

300

-

-

393

300

Interest expense/income

1,920

854

1,715

797

205

57

Actuarial result on long-service payment liabilities

-992

1,668

-

-

-992

1,668

Administrative and other expenses

-

-

-129

-52

129

52

Recognised in other comprehensive income

Actuarial result, experience

485

-3,012

293

-3,630

192

618

Actuarial result, life expectancy

1,490

-

1,187

-

303

-

Actuarial result, indexing

11,031

9,384

-

-

11,031

9,384

Actuarial result, discount rate

-71,172

-18,067

-59,704

-15,534

-11,468

-2,533

Contributions and benefits

Employer contributions

-

-

1,805

816

-1,805

-816

Pension and long-service payments

-9,591

-9,372

-9,591

-9,372

-

-

Total at 31 December

163,805

230,241

140,721

205,145

23,084

25,096

The pension and long-service payments in 2023 will amount to approximately €10 million. Over the next few years, this amount should not change significantly.

The total liability arising from defined benefit-pension plans and long-service payments is recognised in the statement of financial position as follows:

x € 1,000

31 December 2022

31 December 2021

Non-current employee benefits

10,997

24,496

Current employee benefits

12,087

600

23,084

25,096

Liability for defined-benefit plans in the Netherlands

Insured plans

As at year-end 2022, the Group has some 15 insured pension plans in the form of guarantee contracts. The Group is only required to meet the costs of indexation, not to fund increased liabilities due to adverse changes in life expectancy, so the pension plan risk is largely borne by the insurers. Responsibility for holding sufficient funds to pay out all benefits rests with the insurers. Regulatory responsibility lies with DNB. The amount of the additional contribution required to meet annual increases is calculated on the basis of the assumptions contained in the insurance contract. The average term of the pension liabilities is approximately 12 years.

For three insured plans, there is no longer any obligation to make inflation increases. These plans ceased to be included in the pension liabilities as at year-end 2020, and were accounted for as settled in 2020, without any impact on the result. The Group does, however, continue to have a limited risk exposure with respect to these three plans in the event of value transfers (however, these risks are not expected to be material and so have not been recognised).

Industry-wide pension funds

The majority of the pensions have been placed with industry-wide pension funds, the main ones being the Pension Fund for the Construction Industry (Bouwnijverheid) and the Pension Fund for the Engineering, Mechanical and Electrical Contracting Sector (Metaal en Techniek). Both these funds operate average pay plans with annual increases. The funding ratio set by the policy of the Construction Industry pension fund was 131.5% at year-end 2022 (year-end 2021: 119.3%). The Group has a share of approximately 2% (2021: 2%) of the total number of members of this fund. The policy funding ratio for the Engineering, Mechanical and Electrical Contracting Sector stood at 108.1% at year-end 2022 (year-end 2021: 100.8 %). The Group has a share of approximately 0.5% (2021: 0.5%) of the total number of members of this fund. The funding ratios have been calculated on the basis of the actuarial assumptions used by the industry-wide pension funds, in accordance with the Pensions Act and the Financial Assessment Framework.

Since their funding ratios have a marginal effect on the contribution adjustments, these plans qualify as defined-benefit pension plans. Despite this, they are treated as defined-contribution plans because the administration of the industry pension funds is not designed to supply the required information.

With regard to these plans, the Group is only required to pay the predetermined contributions. The Group has no obligation to make up any deficit, other than through future contribution adjustments. The Group has no claim to any surplus in the funds.

Long-service payments

The long-service payments are a month’s salary, or a portion thereof, for employment periods of 25, 40 and 50 years.

Expense items recognised in connection with defined-benefit plans and long-service payments

x € 1,000

2022

2021

Service cost

-393

-300

Interest expense

-1,920

-854

Interest income

1,715

797

-598

-357

Administrative and other expenses

-129

-52

Actuarial result on long-service payment liabilities

992

-1,668

Total expense for defined-benefit plans and long-service payments

265

-2,077

The principal actuarial assumptions as at year-end are:

31 December 2022

31 December 2021

Discount rate

3.60%

0.85%

Future wage inflation

5.06% for 2023. 2.25% for 2024 and later years.

2.25%

Future pay increases

0-1.5%

0-1.5%

Future annual increase

15.44% in 2023 for schemes following the indexation of the industry-wide pension fund for the Construction Industry and 0-1.4% for the other schemes. 0-1.4% for all schemes for 2024 and later years.

0-1.50%

Staff turnover

3.5-12.5%

3.5-12.5%

Life expectancy

Projection table AG 2022 0/0

Projection table AG 2020 0/0

The discount rate is based on high-quality corporate bonds adjusted for the term of the payment obligation. This also applies to the expected yield.

The future annual increase is based on the increase that is expected to be granted by the industry-wide pension fund for the Construction Industry (Bpf Bouw). The calculation for 2023 for schemes that exactly follow the indexation of Bpf Bouw uses indexation of 15.44% since this is the indexation that Bpf Bouw will actually apply in 2023.

Financing liability for defined-benefit plans and long-service payments

x € 1,000

31 December 2022

31 December 2021

Fully funded defined-benefit plans

157,691

223,090

Long-service payments (unfunded)

6,114

7,151

Liability for defined-benefit plans and long-service payments at 31 December

163,805

230,241

As in 2021, all the fully-funded defined-benefit plans are insured schemes. There are no fund investments in equities, fixed-income securities or liquid assets.

Reasonably possible changes in one of the relevant actuarial assumptions on the reporting date, with the other assumptions remaining unchanged, could potentially affect the liabilities associated with the vested pension rights to the extent shown below.

x €1 million

2022

2021

Increase

Decrease

Increase

Decrease

Change of 0.5%-points in the discount rate

-9.4

10.4

-16.4

18.4

Change of 0.25%-points in wage and price inflation and rate of annual increase-

5.2

-2.2

9.0

-3.6

Change of 1 year in life expectancy

6.7

-6.8

11.6

-11.5

The above effects were determined by the actuary who performed the calculations. The combined effect of changes to more than one of the assumptions can be different from the sum of the corresponding individual effects owing to interactions.

The effects presented apply only to the liabilities and not to the fair value of the investments. For a plan in the form of an insurance contract, the guarantee provided by the insurer means that the effects of these changes are largely mitigated by an equal effect on the plan assets.

The Group expects to contribute approximately in €12 million to its defined pension plans in 2023 and approximately €40 million to defined contribution plans (including the above industry-wide pension funds). The amount for the defined pension plans includes contributions for indexation that are higher than in previous years resulting from the decisions of the industry-wide pension fund for the Construction Industry (Bpf Bouw) to apply indexation of 15.44% given its high funding ratio. The additional contributions for later years are expected to be in line with previous years (some €40 million in total) depending in part on changes in the above actuarial assumptions and in particular on the funding ratio of the industry-wide pension fund for the Construction Industry. New constributions cannot be precluded in advance.

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