29. Employee benefits

The non-current employee benefits comprise:

  • other long-term employee benefits, including long-service awards

  • obligations entailed by occupational disability and supplements to social security payments

  • obligations relating to defined benefit plans

(in millions of euros)

December 31, 2017

December 31, 2016

Defined benefit plans

2

2

Other long-term employee benefits

28

29

Total

30

31

Pension liabilities

The staff of the NS Group companies are covered by the pension plans of the following pension funds. The table also shows the numbers of active members.

(number participants)

December 31, 2017

December 31, 2016

Railway pensionfund

17,020

16,514

Industry pensionfund Horeca & Catering

2,837

2,719

Industry pensionfund provision company

765

991

Additional pensionfund Servex

93

149

ScotRail

4,713

4,665

East Anglia/ Greater Anglia

2,308

2,302

Abellio Transport Holdings

25

170

Abellio London & Surrey

2,041

2,120

Qbuzz

-

1,829

Abellio West Midlands

2,475

-

In cases where an employee is a member of an industry pension fund, the NS Group companies have no obligation to pay supplementary contributions in the event of a deficit in that industry pension fund, other than payment of future contributions. Equally, the NS Group companies have no claim to any surpluses in the funds. Consequently these pension plans have here been accounted for in these financial statements as defined contribution plans, in accordance with IFRS.

The total value of the pension contribution payments charged to the income statement in 2017 was €144 million (2016: €131 million).

Railway Pensions Fund (defined contribution plan)

The pension plan for the railway industry is administered by the Railway Pensions Fund (Spoorwegpensioenfonds, SPF). The plan qualifies for recognition in the financial statements as a defined contribution plan. The contribution agreed with SPF is a fixed annual contribution agreed in advance and expressed as a percentage of the pensionable earnings. In 2017, NS paid the nominal pension contribution of 24% to the pension fund. Two-thirds of the pension contributions paid to SPF are at the expense of the company and one-third at the expense of the employees. After payment of the agreed contribution, the company has no obligation to pay additional amounts should there be a deficit in the pension fund. The actuarial risks and investment risks are borne by the pension fund and its members. The pension costs up to 2035 are partly offset by the release of the lump-sum payment for wage increases (see note 28).

At the end of 2015, the Group made new agreements with the pension fund for dealing with the contribution build-up that came into effect on 1 January 2016. This led to a receivable from SPF of about €240 million that will be paid in two years’ time. The employees’ part of the contribution build-up (one third of the amount) is included as a debt and will be settled with the employees over the next few years up to and including 2022. The employer’s part of the contribution build-up (two thirds of the amount) has been added to the lump-sum payment for wage increases and will be credited to the pension costs up to 2035.

There is a defined contribution plan for Abellio London & Surrey, and the Servex supplementary pension plan.

Defined benefit plans

Abellio Greater Anglia, Abellio ScotRail, Abellio West Midlands and Abellio Transport Holdings have arranged for pensions for their staff through the UK Railways Pension Scheme. The fund in question can be considered as a company pension fund and the pension plan as a defined benefit plan.

Every company is a designated employer for one or more cost-sharing agreements within the Railways Pension Scheme. Such cost-sharing agreements are geared to a lifelong pension. The size of the pension depends on how long an employee was an active member of the pension plan and on their salary when leaving the plan (final-salary plan).

Because of the character of the cost-sharing agreements, the amounts payable to cover both the costs of the accrued pension entitlements and any shortfall between the value of the assets and the value of the pension liabilities are borne jointly by the employer and the contributing members in a ratio of 60% to 40% respectively. As a consequence, the employer recognises 60% of the total pension costs and pension liabilities in the balance sheet. The Railways Pension Scheme is administered by the Trustee, the Railways Pension Trustee Company Limited. The plans’ assets are invested in investment funds, each with a different risk and return profile.

The pension liabilities and the pension assets are based on actuarial calculations that were performed for the situation as at 31 December. At year-end 2017, the net liabilities of Abellio Transport Holdings Limited were €2 million (€2 million in 2016). The average term for the pension liabilities is about 24 years.

To reflect the nature of the franchise, the shortfalls between the pension liabilities and the pension assets for Abellio Greater Anglia, Abellio ScotRail and Abellio West Midlands have been included in ‘Non-current liabilities’ to the extent that they concern the franchise period. The remaining amount at the end of the franchise period is not recognised in the balance sheet because it will constitute part of the debts of the next franchise holder. At year-end 2017, the net liabilities were €0 (year-end 2016: €0). The average term for the companies’ pension liabilities is about 20 years.

Basic assumptions for defined benefit plans

The following assumptions were used for determining the pension liabilities and the pension assets (based on a weighted average):

 

December 31, 2017

December 31, 2016

Discountrate

2.9%

2.9%

Increase of salaries

2.6%

2.7%

Increase of pension benefits

2.0%

2.1%

Inflation

2.0%

3.2%

Mortality table: S1NA tables with CMI 2013 projections plus long-term expectation of +1.25%.

Breakdown

The breakdown of the pension liabilities is as follows.

(in millions of euros)

December 31, 2017

December 31, 2016

Fair value of plan assets

1,829

1,193

Defined benefit obligations

2,401

1,721

Deficit

572

528

Members' share of deficit

-229

-211

Deficit at the end of the concessionary

-341

-315

Write-down of pension surplus

-

-

Group's commitments concerning franchise period

2

2

Sensitivity analysis

Reasonably likely changes in one of the relevant actuarial assumptions on the balance-sheet date, while keeping all other assumptions constant, would have the following effect on the gross liability pursuant to the defined benefit entitlements.

(increase of 0.25%) (in millions of euros)

2017

2016

Discountrate

-130

-84

Inflation

140

89

Future salary increase

36

31

A change in life expectancy of one year would lead to a change in the gross liability of about €60 million (€43 million as at 31 December 2016).

The impact that these changes would have on the Group’s net liabilities during the franchise period is expected to be limited given the transfer of liabilities at the end of the franchise.

Movement

The changes in the pension assets and liabilities are as follows.

(in millions of euros)

2017

2016

Plan assets as at 1 January

1,193

1,221

Addion new fund

531

437

Interest income

34

40

Pension contributions

37

38

Pension benefits paid

-33

-75

Administration expenses

-6

-5

Return on plan assets, excluding interest income

119

141

Reduction participants in the fund

-

-437

Exchange rate gains and losses

-46

-167

Plan assets as at 31 December

1,829

1,193

(in millions of euros)

2017

2016

Defined benefit obligations as at 1 January

1,720

1,700

Addion new fund

705

698

Pension costs

71

64

Interest expenses

49

55

Pension benefits paid

-33

-75

Net actuarial gain or loss

-44

210

Reduction participants in the fund

-

-698

Exchange rate gains and losses

-67

-233

Defined benefit obligations as at 31 December

2,401

1,721

Breakdown of plan assets

The breakdown of the plan assets is as follows.

(in millions of euros)

December 31, 2017

December 31, 2016

Shares

1,150

722

Fixed-income securities

207

148

Property

173

121

Cash

251

146

Other

48

56

Total

1,829

1,193

Pension costs recognised in the income statement

(in millions of euros)

2017

2016

Pension costs

43

38

Interest expenses

-

-

Administration expenses

4

3

Total

47

41

Unrealised actuarial gains and losses

(in millions of euros)

2017

2016

Net actuarial gain or loss

  

-Demographic assumptions

-

-

-Financial assumptions

39

-244

-Experience adjustments

5

35

Return on plan assets, excluding interest income

119

141

Franchise adjustment

-74

58

Changes in members' share

-68

23

Total

21

13

Based on current accounting policies, the Group expects to recognise pension costs for Abellio of €71 million for the above defined benefit plans in 2018.

Other non-current employee benefits

This includes long-service award obligations. The AG2017 mortality table is used for the calculation of the long-service award obligations.

The changes in the provision were as follows.

(in millions of euros)

2017

2016

Long-service award obligation as at 1 January

29

28

Payments

-3

-4

Actuarial gains and losses

-

2

Accrued interest

2

3

Long-service award obligation as at 31 December

28

29

The current portion of this provision is €3 million.

The sensitivities are as follows.

 

2017

2016

Discounting (-0.5%)

4.6%

4.4%

Total wage increase (-0.5%)

4.2%

4.1%

Careeropportunities (+25%)

3.0%

2.8%

Resignation probability (+25%)

-5.0%

-4.7%

Accounting policies

‘Employee benefits’ includes pension liabilities for pension plans and other obligations relating to employee benefits, consisting of long-service awards, early retirement payments and obligations due to employees’ occupational disability.

Defined contribution plans are plans under which the Group has no obligations other than to pay the contractual contributions. These contributions are recognised in the income statement in the period for which the contribution is payable.

Defined benefit plans are those plans in which the Group’s obligations extend beyond payment of the mandatory, contractually agreed contribution to pension funds or insurance companies. The Group's net liability is determined individually for each plan by estimating the pension entitlements that employees have accrued in the reporting period and the preceding years. The net present value of these pension entitlements is determined, and netted off against the fair value of the invested pension assets. The discount rate is the interest rate as at the balance-sheet date for high-grade fixed income securities for which the term to maturity is approximately the same as that of the pension liabilities. The calculation takes account of elements such as future wage increases resulting from general developments in wage levels and career opportunities, inflation, and current life expectancies. The calculation is performed annually by a qualified actuary using the projected unit credit method. If the calculation results in a benefit to the Group, the recognised asset cannot exceed the net value of any unrecognised past-service pension costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. The employee’s portion is deducted from the liability.

The pension liabilities relating to the Group business units that are based in the United Kingdom have been included for the period during which the transport franchises operate.

The change in pension liabilities and investment returns anticipated at the start of the year, based on the actuarial calculations, is included as a change in the net liabilities and recognised in the income statement. Contributions paid by employers and employees are deducted from the net liabilities. The actuarial gains and losses, which comprise the difference between the actual and anticipated changes in the pension liabilities and investment returns, are recognised in the comprehensive income.

Liabilities relating to long-service awards and early retirement are calculated actuarially and recognised at net present value. This takes account of developments in wages and prices, recent mortality tables and estimates of the employment contract. Any actuarial gains or losses are recognised in the income statement in the period in which they occur.

The liabilities due to occupational disability are determined in a similar fashion.

Short-term employee benefits

Any entitlements to time off that have not been taken are converted to the present value, taking account of future salary increases.

Other short-term employee benefits are measured without being converted to the present values and recognised when the service associated with them is rendered