6.23 Provision for employee benefits

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

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

Liability for defined-benefit plans in the Netherlands

Insured plans

As at year-end 2024, 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 Dutch central bank (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 (Bpf Bouw) and the pension fund for the engineering, mechanical and electrical contracting sector (Metaal en Techniek or PMT). Both these funds operate average pay plans with annual indexed increases. The policy funding ratio reported by Bpf Bouw stood at 126.3% at year-end 2024 (year-end 2023: 109.8%). The Group has a share of approximately 2% (2023: 2%) of the total number of members of this pension fund. The policy funding ratio for PMT stood at 108.5% at year-end 2024 (year-end 2023: 109.8%). The Group has a share of approximately 0.5% (2023: 0.5%) of the total number of members of this pension fund. These policy funding ratios are calculated on the basis of the actuarial assumptions used by the industry-wide pension funds, in accordance with the requirement set for these funds (including the Dutch Pensions Act and the Dutch Financial Assessment Framework). Since contribution adjustments have a marginal effect on the funding ratio’s, these plans qualify as defined-benefit pension plans. Despite this, in the financial statements they are treated as defined-contribution plans because the administrations of the industry-wide pension funds are 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

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 Bpf Bouw. For schemes that follow the indexation of Bpf Bouw one-to-one, future indexation is based on the indexation that Bpf Bouw is expected to grant. For the year after the reporting date, this includes the indexation of 1.70% actually granted by Bpf Bouw.

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

As in 2023, 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 defined-benefit plans and long-service payments.

The above effects were determined by the actuary who performed the calculations. The combined effect of changes to more than one of the assumptions is likely to differ from the sum of the corresponding individual effects due 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 indexation of defined benefit plans in the first subsequent year after the reporting date has already been explained above in the actuarial assumptions. In addition, the Group expects expenses of approximately € 47 million in 2025 in connection with its defined contribution plans (including the above-mentioned industry-wide pension fund plans). The contributions for later years are expected to be in line with this amount, and will partly depend on changes in the above actuarial assumptions and in particular on the development of the policy funding ratio of Bpf Bouw. It cannot be ruled out the Group will have to make supplementary contributions in the future.