6.23 Employee benefits

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

x € 1,000

The pension and long-service payments will amount to approximately € 10 million in 2024. 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

The drop in the current employee-related liability is mainly due to the indexation, which is determined by the sector pension fund for the construction industry (BpfBOUW). This was 14.5% for 2023 and is 0% for 2024.

Liability for defined-benefit plans in the Netherlands

Insured plans

As at year-end 2023, 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 11 years.

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 124.7% at year-end 2023 (year-end 2022: 131.5%). The Group has a share of approximately 2% (2022: 2%) of the total number of members of this fund. The policy funding ratio for the pension fund for engineering, mechanical and electrical contracting sector stood at 109.8% at year-end 2023 (year-end 2022: 108.1%). The Group has a share of approximately 0.5% (2022: 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

The principal actuarial assumptions as at year-end were:

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 indexation is based on the indexation that is expected to be granted by the industry-wide pension fund for the construction industry (bpfBOUW). For schemes that follow the indexation of the pension fund for the construction industry (bpfBOUW) one-to-one, future indexation is based on the indexation that bpfBOUW is expected to grant. For the year after the reporting date, this includes the indexation actually granted by bpfBOUW, i.e. 15.44% for 2023 and 0.00% for 2024.

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

x € 1,000

As in 2022, 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.

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 does not expect to have to make any contributions to its defined pension plans in 2024. This is because bpfBOUW does not expect any indexation for 2024. In addition, this involves approximately € 43 million in defined contribution plans (including the above-mentioned industry-wide pension funds). The contributions for later years are expected to be in line with this, partly dependent 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 contributions cannot be precluded in advance.