Note 36 Pension provisions
General
Vattenfall’s pension obligations in the Group’s Swedish and German companies are predominantly defined benefit pension obligations. The concerned pension plans are primarily retirement pensions, disability pensions and family pensions. The assets in these funds (the plan assets) are reported at fair value. There are also pension plans in these and other countries that are defined contribution plans.
Swedish pension plans
The Swedish pension plans supplement the Swedish social insurance system and are the result of agreements between employer and employee organisations. Almost all of Vattenfall’s employees in Sweden are covered by a pension plan that is primarily a defined benefit plan, known as ITP-Vattenfall. This pension plan guarantees employees a pension based on a percentage of their salary. These benefits are chiefly secured in a pension trust or through provisions in the balance sheet.
Certain of Vattenfall’s obligations in the ITP plan are secured through an insurance policy from Alecta (a Swedish mutual insurance company), e.g. spouse’s benefits and disability benefits. According to a statement issued by the Swedish Financial Reporting Board, UFR 3, this plan is a multi-employer defined benefit plan. As in previous years, Vattenfall has not had access to such information as to make it possible to report this plan as a defined benefit plan. The ITP pension plan, which is secured through an insurance policy from Alecta, is therefore reported as a defined contribution plan. Contributions for the year for pension insurance policies from Alecta amount to SEK 72 million (97). Alecta’s surplus can be distributed among the policyholders and/or the insureds. At the end of 2008, Alecta’s surplus in the form of its so-called collective funding amounted to 112% (152%). Collective funding consists of the fair value of Alecta’s assets as a percentage of the insurance obligations calculated in accordance with Alecta’s actuarial calculation assumptions.
German pension plans
The pension plans in Germany are based on collective agreements in line with market terms and conditions. Substantial defined benefit plans exist in Germany for employees of the companies Vattenfall Europe Berlin and Vattenfall Europe Hamburg.
Vattenfall Europe Berlin has two pension plans, both secured through Pensionskasse der Bewag, a mutual insurance company. This plan is financed through funds from Vattenfall Europe Berlin and its employees. One plan has been classified as a defined contribution plan and is reported as such since the benefit is based on paid-in contributions and Pensionskasse der Bewag’s financial position. For employees who began their employment before 1 January 1984, there is a supplementary agreement providing employees working until retirement age with a pension equal to up to 80% of the salary on which the pension is based. Half of the statutory pension and the entire benefit from Pensionskasse der Bewag, including profits, are credited to the guaranteed amount. Vattenfall Europe Berlin’s obligations encompass the entire pension obligation. The plan assets attributable to personnel employed since before 1 January 1984 are reported as plan assets at fair value.
Pension obligations for Vattenfall Europe Hamburg employees mainly comprise of the company’s obligations to personnel employed before 1 April 1991 and who have been employed for at least 10 years. The sum of the retirement pension, statutory pension and pensions from third parties normally amounts to a maximum of 65% of pensionable salary.
| 2008 | 2007 | |
| Present value of unfunded obligations | 20,410 | 16,876 |
| Present value of fully or partly funded obligations | 18,865 | 16,881 |
| Present value of obligations | 39,275 | 33,757 |
| Fair value of plan assets | 17,436 | 16,684 |
| Present value of net obligations | 21,839 | 17,073 |
| Unrecognised actuarial gains(+)/ | ||
| losses(-) of the obligations | -142 | 504 |
| Unrecognised actuarial gains(+)/ | ||
| losses(-) of the obligations | -945 | 158 |
| Pension provisions | 20,752 | 17,735 |
| 2008 | 2007 | |
| Balance brought forward | 33,757 | 35,647 |
| Benefits paid by the plan | -1,882 | -1,734 |
| Service costs | 606 | 609 |
| Actuarial gains(+) or losses(-) | 830 | -3,602 |
| Current interest expense | 1,706 | 1,576 |
| Translation differences | 4,258 | 1,261 |
| Balance carried forward | 39,275 | 33,757 |
| 2008 | 2007 | |
| Balance brought forward | 16,684 | 15,977 |
| Benefits paid by the plan | -507 | -343 |
| Expected return on plan assets | 762 | 765 |
| Difference between expected and actual return (actuarial gain(+) or loss(-)) |
-1,057 | -171 |
| Translation differences | 1,554 | 456 |
| Balance carried forward | 17,436 | 16,684 |
| 2008 | 2007 | |
| Equity securities | 3,443 | 4,149 |
| Debt instruments | 11,837 | 10,551 |
| Property | 787 | 638 |
| Other | 1,369 | 1,346 |
| Total | 17,436 | 16,684 |
| 2008 | 2007 | 2006 | 2005 | 2004 | |
| Present value of obligations | 39,275 | 33,757 | 35,647 | 37,615 | 32,313 |
| Fair value of plan assets | 17,436 | 16,684 | 15,977 | 16,248 | 14,972 |
| Present value of net obligations | 21,839 | 17,073 | 19,670 | 21,367 | 17,341 |
Payments for contributions to defined benefit plans during 2009 are estimated at SEK 1,421 million.
| 2008 | 2007 | |
| Defined benefit plans: | ||
| Current service cost | 497 | 558 |
| Interest expense | 1,706 | 1,576 |
| Expected return on plan assets | -762 | -765 |
| Past service cost | 104 | 52 |
| Other | 9 | 29 |
| Total cost for defined benefit plans | 1,554 | 1,450 |
| Cost for defined contribution plans | 359 | 440 |
| Total pension costs | 1,913 | 1,890 |
| 2008 | 2007 | |
| Cost of products sold | 838 | 846 |
| Selling expenses | 50 | 66 |
| Administrative expenses | 82 | 167 |
| Financial expenses | 943 | 811 |
| Total pension costs | 1,913 | 1,890 |
| 2008 | 2007 | |
| Discount rate | 4.0-5.75 | 4.5-5.25 |
| Expected return on plan assets | 4.5-5.25 | 4.25-5.25 |
| Future annual salary increases | 2.5-3.9 | 2.5-3.5 |
| Future annual pension increases | 2.0 | 2.0 |
