36. Pension Provisions

Pension Obligations

Provisions for pensions and similar obligations are formed for commitments arising from both vested rights to future pension payments and current payments to active and former members of HHLA Group companies in Germany and any surviving dependants who are entitled to receive such benefits. A distinction is made between defined benefit and defined contribution company pension plans.

Defined Benefit Pension Plans

In the case of defined benefit plans, the Group is obliged to make the agreed payments to current and former employees. HHLA’s pension scheme is financed by both provisions and funds.

Company retirement benefits are paid on the basis of various entitlements. As well as individual agreements these are primarily the collective company pension agreement (BRTV) and the so-called “port pension”, which is governed by a collective labour agreement for port workers in German seaports.

The BRTV is a total benefit plan. HHLA guarantees the participating employees a certain amount of benefits, which are made up of the statutory pension and the company pension. The amount of total benefits is determined by a variable percentage (according to years of service) of a fictitious net payment in the final wage or salary band based on the applicable social security data contribution levels for the year 1999. The current contribution assessment ceiling is always taken into account.

The amount of the port pension depends on the years in service and is determined by the collective labour agreement for German seaports.

Based on these pension plans, the Group forms provisions for pensions and similar obligations for the amount of expected future retirement and surviving dependants’ pensions. External actuaries calculate the amount of the obligation using the projected unit credit method.

Amounts Recognised for Benefit Commitments

in € thousand

 

31.12.2015

 

31.12.2014

Present value of pension commitments

 

403,613

 

436,227

Obligations from working lifetime accounts

 

11,995

 

7,331

 

 

415,608

 

443,558

Pension Commitments

The balance sheet shows the full present value of pension obligations including actuarial gains and losses. The reported pension obligation relates to an unfinanced plan.

Development of the Present Value of Pension Obligations

in € thousand

 

2015

 

2014

Present value of pension obligations as of 1. January

 

436,227

 

360,921

Current service expense

 

5,038

 

3,960

Past service expense

 

547

 

0

Interest expense

 

7,461

 

12,280

Pension payments

 

- 19,487

 

- 19,773

Actuarial gains (+), losses (-) due to amendments in biometric assumptions

 

2,060

 

- 10,580

Actuarial gains (+), losses (-) due to amendments in financial assumptions

 

- 28,233

 

89,419

Present value of pension obligations as of 31. December

 

403,613

 

436,227

Present Value of the Defined Benefit Pension Obligations Split by Various Groups of Beneficiaries

in %

 

2015

 

2014

Current employees

 

37.4

 

39.3

Former employees

 

3.0

 

1.9

Pensioners

 

59.6

 

58.8

 

 

100.0

 

100.0

As of 31 December 2015, the weighted average term of the was 13.8 years (previous year: 14.5 years).

Pension Commitments Recognised in the Income Statement

in € thousand

 

2015

 

2014

Current service expense

 

5,038

 

3,960

Past service expense

 

547

 

0

Interest expenses

 

7,461

 

12,280

 

 

13,046

 

16,240

Development of Actuarial Gains/Losses from Pensions Commitments

in € thousand

 

2015

 

2014

Actuarial gains (+)/losses (-) as of 1 January

 

- 65,983

 

12,856

Changes in the financial year due to amendments in biometrical assumptions

 

- 2,060

 

10,580

Changes in the financial year due to amendments in financial assumptions

 

28,233

 

- 89,419

Actuarial gains (+)/losses (-) as of 31 December

 

- 39,810

 

- 65,983

Actuarial Assumptions to Determine Pension Provisions

in %

 

31.12.2015

 

31.12.2014

Discount rate

 

2.25

 

1.75

Projected salary increase

 

3.00

 

3.00

Projected increase in pensions (without BRTV)

 

2.00

 

2.00

Projected increase in pensions (monthly pensions under BRTV)

 

1.00

 

1.00

Fluctuation rate

 

2.10

 

2.10

Rate of inflation

 

2.00

 

2.00

Adjustment of Social Security Pension according to Pension Insurance Report

 

2015

 

2014

The biometric data is drawn from the 2005 G actuarial tables by Prof. Dr. Klaus Heubeck.

HHLA derives the interest rates used for discounting from corporate loans with a very good credit rating whose terms and payouts match HHLA’s pension plans.

Sensitivity Analysis: Pension Provisions

 

 

Change in parameter

 

Effect on present value

 

 

 

 

31.12.2015

 

31.12.2014

 

in € thousand

 

31.12.2015

 

31.12.2014

Discount rate

 

Increase of

 

0.5 %

 

0.5 %

 

Decrease of

 

24,729

 

27,569

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Increase of

 

27,525

 

30,808

Payment trend

 

Increase of

 

0.5 %

 

0.5 %

 

Increase of

 

4,407

 

5,321

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Decrease of

 

4,305

 

5,180

Adjustment to state pension

 

Decrease of

 

20.0 %

 

20.0 %

 

Increase of

 

1,606

 

2,309

Expected mortality

 

Decrease of

 

10.0 %

 

10.0 %

 

Increase of

 

15,260

 

16,888

Actuarial calculations for the valuation parameters classed as material are performed in isolation, i.e. if several parameters change simultaneously, the individual effects are not cumulative due to correlation. In the case of a change to the parameters, a linear trend for the defined benefit obligation cannot be drawn from the sensitivities stated.

Pension Payments

In the 2015 financial year, HHLA made pension payments for plans totalling € 19,487 thousand. HHLA anticipates the following payments for pension plans over the next five years.

Expected Pension Payments

in € thousand

 

 

2016

 

21,017

2017

 

20,966

2018

 

20,998

2019

 

20,781

2020

 

20,884

 

 

104,646

Obligations from Working Lifetime Accounts

In the 2006 financial year, the affiliated companies in Germany undertook to set up working lifetime accounts due to collective labour agreements. Staff could elect to have remuneration components paid into money market or investment funds by the Group until 31 December 2013. Capital has been invested within the company since 1 January 2014. The funds saved in the employee’s account are used to give them paid leave before they enter retirement. The amount of pay to which employees are entitled during their early retirement depends on the amount of funds saved, which in turn depends on the performance of the fund assets – based on the model for contributions up to 31 December 2013 and taking the return guaranteed in the collective labour agreement into account for contributions as of 1 January 2014 – plus other contractually agreed social benefits during the early retirement phase.

The portion of the obligations covered by the funds saved is reported at the funds’ fair value. The additional benefits arising from collective labour agreements which are not covered by the funds saved are reported at the full present value of the obligation including actuarial gains and losses.

Allocation of Benefit Commitments

in € thousand

 

31.12.2015

 

31.12.2014

Present value of obligations

 

24,767

 

20,266

Present value of plan assets (fund shares)

 

- 12,772

 

- 12,935

Uncovered allocations

 

11,995

 

7,331

Development of the Present Value of the Obligations from Working Lifetime Accounts

in € thousand

 

2015

 

2014

Present value of the obligations from working lifetime accounts as of 1 January

 

20,266

 

16,547

Current service expense

 

3,432

 

3,888

Interest expenses

 

388

 

557

Actuarial gains (-), losses (+) due to amendments in biometric assumptions

 

1,770

 

- 683

Actuarial gains (-), losses (+) due to amendments in financial assumptions

 

- 1,042

 

365

Capital payments

 

- 47

 

- 408

Present value of the obligations from working lifetime accounts as of 31 December

 

24,767

 

20,266

As of 31 December 2015, the weighted average term of the defined benefit obligation was 20.0 years (previous year: 20.0 years).

Development of the Fair Value of Plan Assets from Working Lifetime Accounts

in € thousand

 

2015

 

2014

Fair value of plan assets from working lifetime accounts as of 1 January

 

12,935

 

13,054

Expected income from plan assets

 

230

 

435

Proceeds

 

0

 

167

Actuarial gains (-), losses (+) due to amendments in financial assumptions

 

- 351

 

- 378

Capital payments

 

- 42

 

- 343

Fair value of plan assets from working lifetime accounts as of 31 December

 

12,772

 

12,935

The plan assets consist solely of shares in money market and investment funds. Losses of € 148 thousand were recorded on the plan assets in the financial year (previous year: € 145 thousand).

Actuarial Assumptions to determine Provisions from Working Lifetime Accounts

in %

 

31.12.2015

 

31.12.2014

Discount rate

 

2.25

 

1.75

Anticipated return on invested capital

 

2.25 – 3.00

 

1.75 – 3.00

Forecast increase in pay

 

3.00

 

3.00

The biometric data is drawn from the 2005 G actuarial tables by Prof. Dr. Klaus Heubeck, taking into account age-related fluctuation.

Working Lifetime Accounts recognised in the Income Statement (with the exception of the covered part of the service expenses for funds)

in € thousand

 

2015

 

2014

Current service expense including salary conversion

 

3,432

 

3,888

thereof gathered at costs as uncovered part

 

301

 

823

thereof gathered at funds as covered part

 

3,131

 

3,065

Interest expenses

 

388

 

557

Expected income from the plan assets

 

- 230

 

- 435

Benefits paid (service expense)

 

- 5

 

- 65

 

 

3,585

 

3,945

Development of Actuarial Gains/Losses from Working Lifetime Accounts

in € thousand

 

2015

 

2014

Actuarial gains (+)/losses (-) as of 1. January

 

252

 

312

Changes in the financial year due to amendments in biometrical assumptions

 

- 1,770

 

683

Changes in the financial year due to amendments in financial assumptions

 

691

 

- 743

Actuarial gains (+)/losses (-) as of 31 December

 

- 827

 

252

Sensitivity Analysis: Working Lifetime Accounts

 

 

Change in parameter

 

Effect on present value

 

 

 

 

31.12.2015

 

31.12.2014

 

in € thousand

 

31.12.2015

 

 

 

31.12.2014

Discount rate

 

Increase of

 

0.5 %

 

0.5 %

 

Decrease of

 

852

 

Decrease of

 

782

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Increase of

 

972

 

Increase of

 

897

Payment trend

 

Increase of

 

0.5 %

 

0.5 %

 

Increase of

 

62

 

Increase of

 

27

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Decrease of

 

69

 

Decrease of

 

30

Expected mortality

 

Decrease of

 

10.0 %

 

10.0 %

 

Decrease of

 

12

 

Increase of

 

26

Actuarial calculations for the valuation parameters classed as material are performed in isolation, i.e. if several parameters change simultaneously, the individual effects are not cumulative due to correlation. In the case of a change to the parameters, a linear trend for the cannot be drawn from the sensitivities stated.

The obligations from working lifetime accounts were financed by paying a portion of employees’ remuneration into the unit-linked pension plan by 31 December 2013. For 2016, HHLA expects payments in the amount of € 3.2 million.

Portfolio for Obligations from Working Lifetime Accounts

in %

 

2015

 

2014

Money market funds

 

52

 

52

Mixed funds

 

32

 

30

Funds of funds

 

15

 

16

Annuity funds

 

1

 

2

 

 

100

 

100

Payments for Obligations from Working Lifetime Accounts

In the financial year under review, HHLA made payments for plans totalling € 47 thousand. In return, the company acquired corresponding securities holdings worth € 42 thousand. The outflow of funds therefore amounted to € 5 thousand in the year under review.

Expected Payments for Obligations from Working Lifetime Accounts which are not Hedged by Securities

in years in € thousand

 

 

2016

 

263

2017

 

367

2018

 

430

2019

 

568

2020

 

545

 

 

2,173

Defined Contribution Pension Plans

In the case of defined contribution plans, the relevant companies merely make payments to dedicated funds. There are no further obligations. HHLA does not incur any financial or actuarial risks arising from these commitments.

The costs incurred in connection with pension funds which are to be regarded as defined contribution pension plans amounted to € 4,454 thousand in the reporting year (previous year: € 4,333 thousand).

HHLA paid € 26,005 thousand (previous year: € 26,046 thousand) into the state pension system as its employer’s contribution.

DBO (Defined Benefit Obligation)

Performance-oriented pension obligations arising from the accrued and estimated pension rights of active and former members of staff as at settlement day, allowing for probable future changes in pensions and emoluments.

DBO (Defined Benefit Obligation)

Performance-oriented pension obligations arising from the accrued and estimated pension rights of active and former members of staff as at settlement day, allowing for probable future changes in pensions and emoluments.