24. Employee benefits

The non-current employee benefits comprise:

  • other non-current employee benefits, including long-service awards;

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

  • obligations in connection with defined benefit pension plans.

(in millions of euros)

December 31, 2016

December 31, 2015

Defined benefit plans

2

2

Other long-term employee benefits

29

28

Total

31

30

    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, 2016

    December 31, 2015

    Railway pensionfund

    16,514

    16,073

    Industry pensionfund Horeca & Catering

    2,719

    2,835

    Industry pensionfund provision company

    991

    670

    Additional pensionfund Servex

    149

    151

    ScotRail

    4,665

    4,660

    Greater Anglia

    2,302

    2,191

    Abellio Transport Holdings

    170

    78

    Abellio London & Surrey

    2,120

    1,918

    Qbuzz

    1,829

    1,993

    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, as required by IFRS.

    The total value of the pension contribution payments charged to the income account in 2016 was €131 million (2015: €96 million).

    Spoorwegpensioenfonds pension plan (defined contribution plan)

    The pension plan for the railway industry is administered by Spoorwegpensioenfonds. 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 2016 Ns paid the nominal pension premium of 24% to the pension fund. Two-thirds of the pension contributions paid to Spoorwegpensioenfonds 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 22).

    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 from 1 January 2016. This led to a receivable payable by Spoorwegpensioenfonds 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, Qbuzz and the Servex supplementary pension scheme.

    Defined benefit plans

    Abellio Greater Anglia, Abellio ScotRail and Abellio Transport Holdings have arranged for a pension 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 plan’s 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 on 31 December. At year-end 2016, the net liabilities of Abellio Transport Holdings Limited were €2 million (€2 million in 2015). The average term for the pension liabilities is about 24 years.

    To reflect the nature of the concession, the shortfall between the pension liabilities and the pension assets for Abellio Greater Anglia and Abellio ScotRail have been included in ‘Non-current liabilities’ to the extent that they concern the concession period. The remaining amount at the end of the concession period is not recognised in the balance sheet because it will constitute part of the debts of the following concession holder.The net liabilities were zero at year-end 2016 (zero at year-end 2015). The average term for both 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, 2016

    December 31, 2015

    Discountrate

    2.9%

    3.8%

    Increase of salaries

    2.7%

    3.4%

    Increase of pension benefits

    2.1%

    2.1%

    Inflation

    3.2%

    3.1%

    • *Mortality table: 2013 SFO valuation (Greater Anglia and ScotRail) and S1NA tables with CMI 2013 projections (Abellio Holdings) plus long term expectation + 1.25%.

    Breakdown

    The breakdown of the pension liabilities is as follows:

    (in millions of euros)

    December 31, 2016

    December 31, 2015

    Fair value of plan assets

    1,193

    1,221

    Defined benefit obligations

    1,721

    1,700

    Deficit

    528

    479

    Members' share of deficit

    -211

    -192

    Deficit at the end of the concessionary

    -315

    -285

    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:

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

    Increase

    Decrease

    Discountrate

    -84

    88

    Inflation

    89

    -85

    Future salary increase

    31

    -31

    A change in life expectancy of one year would lead to a change in the gross liability of about €43 million (December 31, 2015 : €43 million).

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

    Movement

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

    (in millions of euros)

    2016

    2015

    Plan assets as at 1 January

    1,221

    460

    Addion new fund

    437

    735

    Interest income

    40

    36

    Pension contributions

    38

    44

    Pension benefits paid

    -75

    -30

    Administration expenses

    -5

    -5

    Return on plan assets, excluding interest income

    141

    -9

    Reduction participants in the fund

    -437

    -36

    Exchange rate gains and losses

    -167

    26

    Plan assets as at 31 December

    1,193

    1,221

       

    Defined benefit obligations as at 1 January

    1,700

    722

    Addion new fund

    698

    1,048

    Pension costs

    64

    66

    Interest expenses

    55

    54

    Pension benefits paid

    -75

    -30

    Net actuarial gain or loss

    210

    -140

    Reduction participants in the fund

    -698

    -61

    Exchange rate gains and losses

    -233

    41

    Defined benefit obligations as at 31 December

    1,721

    1,700

    Breakdown of plan assets

    The breakdown of the plan assets is as follows:

    (in millions of euros)

    December 31, 2016

    December 31, 2015

    Shares

    722

    769

    Fixed-income securities

    148

    80

    Property

    121

    150

    Cash

    146

    134

    Other

    56

    88

    Total

    1,193

    1,221

    Pension costs recognised in the income statement

    (in millions of euros)

    2016

    2015

    Pension costs

    38

    41

    Interest expenses

    -

    -

    Administration expenses

    3

    3

    Total

    41

    44

    Unrealised actuarial gains and losses

    (in millions of euros)

    2016

    2015

    Net actuarial gain or loss

      

    -Demographic assumptions

    -

    -6

    -Financial assumptions

    -244

    145

    -Experience adjustments

    35

    25

    Return on plan assets, excluding interest income

    141

    -9

    Franchise adjustment

    58

    -78

    Changes in members' share

    23

    -61

    Total

    13

    16

    The Group expects to recognise pension costs amounting to €47 million relating the above-mentioned defined benefit plans in 2017.

    Other non-current employee benefits

    This includes long-service obligations. The AG2016 mortality table is used for the calculation of the long-service obligations.

    The changes in the provision were as follows:

    (in millions of euros)

    2016

    2015

    Long-service award obligation as at 1 January

    28

    31

    Payments

    -4

    -3

    Actuarial gains and losses

    2

    -1

    Accrued interest

    3

    1

    Long-service award obligation as at 31 December

    29

    28

    The current portion of this provision is €4 million.

    The sensitivities are as follows:

    Discounting (-0.5%)

    4.4%

    4.1%

    Total wage increase (-0.5%)

    -4.1%

    -3.8%

    Careeropportunities (+25%)

    2.8%

    2.6%

    Resignation probability (+25%)

    -4.7%

    -4.4%