Note 27. Defined benefit obligations
The Group has defined benefit commitments to employees and former employees and their survivors. The benefits are referring to old age pension, survivor’s pension, disability pension, health care and severance pay.
The defined benefit plans are in place in Austria, Belgium, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Netherlands, Norway, Philippines, South Africa, Sweden, Switzerland, Taiwan, the United Kingdom and the United States. Most plans have been closed for new participants and replaced by defined contribution plans for new employees.
Risks
The cost for defined benefit obligations is impacted by several factors that are outside the control of the company, such as the discount rate, the return on plan assets, future salary increases, the development of the average length of life and the claim rates under medical plans. The size of and the development of these costs are therefore difficult to predict. According to the IAS 19 all of these remeasurements are reported in other comprehensive income.
The following table presents how the net defined benefit liability is arrived at out of the present values of the different defined benefit plans, less the fair value of the plan assets.
| Net defined benefit liability | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Present value of defined benefit obligation, unfunded | -926 | -1,042 |
| Present value of defined benefit obligation, funded | -4,357 | -4,390 |
| Present value of defined benefit obligation at year end | -5,283 | -5,432 |
| Fair value of plan assets | 4,438 | 4,486 |
| Net defined benefit liability | -845 | -946 |
| Less disallowed assets due to asset ceiling | -6 | -45 |
| (-) liability/(+) asset at December 31 | -851 | -991 |
The net plan cost for the defined benefit plans describes the different cost elements of the plans. The net plan cost is reported in the consolidated comprehensive income statement on the lines where personnel costs are reported. The interest cost/income is not part of the financial net, but instead just a way to categorize the components of the net plan cost. All remeasurements are reported in other comprehensive income and will never be reclassified to net income.
| Total plan cost | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Net plan cost |
| |
| Current service cost | -46 | -25 |
| Net interest cost/income | -31 | -31 |
| Past service cost/income from plan amendments and curtailments and gains and losses on settlements | 109 | 15 |
| Net plan (-) cost/(+) income | 32 | -41 |
| Remeasurements |
| |
| Actuarial losses/gains arising from changes in demographic assumptions | 46 | 14 |
| Actuarial losses/gains arising from changes in financial assumptions | -159 | 1 705 |
| Actuarial losses/gains arising from changes in experience | 41 | -77 |
| Return on plan assets less interest on plan assets | -48 | -1 269 |
| Change in disallowed assets due to asset ceiling | -6 | -45 |
| Other comprehensive income (OCI) | -126 | 328 |
| Total plan cost | -94 | 287 |
The following table presents how the present value of the defined benefit liability has changed during the year and lists the different components of the change.
| Present value of defined benefit liability | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Present value of defined benefit liability at January 1 | -5,432 | -6,762 |
| Acquired businesses | – | -154 |
| Translation difference | 79 | -297 |
| Current service cost | -46 | -25 |
| Interest cost | -183 | -124 |
| Employee contributions | -1 | -4 |
| Actuarial losses/gains arising from changes in demographic assumptions | 46 | 14 |
| Actuarial losses/gains arising from changes in financial assumptions | -159 | 1,705 |
| Actuarial losses/gains arising from changes in experience | 41 | -77 |
| Past service cost/income from plan amendments and curtailments and gains and losses on settlements | 109 | 15 |
| Benefit payments | 263 | 263 |
| Settlement payments | 0 | 14 |
| (-) liability at December 31 | -5,283 | -5,432 |
The liability has the following duration and maturity:
| Duration and maturity | ||
| Consolidated | ||
|
| 2023 | 2022 |
| Weighted average duration of the defined benefit obligation (years) | 6 | 7 |
| Maturity analysis of benefit payments (non-discounted amounts) SEK millions |
| |
| maturity ≤ 1 year | 272 | 263 |
| maturity > 1 ≤ 5 years | 1,120 | 1,015 |
| maturity > 5 ≤ 10 years | 1,592 | 1,574 |
| maturity > 10 ≤ 20 years | 3,029 | 3,057 |
| maturity > 20 years | 3,748 | 3,933 |
The following table presents how the fair value of the plan assets has developed during the year and lists the components of the change.
| Fair value of plan assets | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Fair value of plan assets at January 1 | 4,486 | 4,925 |
| Acquired businesses | – | 118 |
| Translation difference | -81 | 177 |
| Employer contributions | 130 | 652 |
| Employee contributions | 1 | 4 |
| Interest on plan assets | 152 | 93 |
| Return on plan assets less interest on plan assets | -48 | -1,269 |
| Benefit payments | -202 | -202 |
| Settlement payments | 0 | -12 |
| Other | 0 | 0 |
| (+) asset at December 31 | 4,438 | 4,486 |
The plan assets are split on the following types of assets:
| Split of plan assets | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Cash and cash equivalents | 379 | 612 |
| Equity instruments | 788 | 782 |
| Debt instruments | 2,174 | 1,976 |
| Real estate | 95 | 111 |
| Investment funds | 1,002 | 1,005 |
| Fair value at December 31 | 4,438 | 4,486 |
The plan assets are in all essentials valued at quoted market prices in active markets.
The table below presents how the net defined benefit liability has changed and the factors affecting the change.
| Net defined benefit liability/asset | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Defined benefit liability/asset at January 1 | -991 | -1,837 |
| Acquired businesses | – | -36 |
| Translation difference | 43 | -120 |
| Net plan cost | 32 | -41 |
| Employer contributions | 130 | 652 |
| Remeasurements (other comprehensive income) | -126 | 328 |
| Benefit payments, unfunded plans | 61 | 61 |
| Settlement payments, unfunded plans | 0 | 2 |
| Other | 0 | 0 |
| (-) liability/(+) asset at December 31 | -851 | -991 |
The gross plan assets and gross defined benefit liabilities of each plan are to be reported as a net amount. The following table shows how the net asset and the net liability are calculated.
| Gross defined benefit liability/asset | ||
| Consolidated | ||
| SEK millions | 2023 | 2022 |
| Assets |
| |
| Fair value of plan assets | 4,438 | 4,486 |
| Less disallowed assets due to asset ceiling | -6 | -45 |
| 4,432 | 4,441 | |
| Netting | -4,193 | -4,240 |
| Assets in statement on financial position | 239 | 201 |
| Liabilities |
| |
| Present value of defined benefit obligation at year end | -5,283 | -5,432 |
| Netting | 4,193 | 4,240 |
| Provision in statement on financial position | -1,090 | -1,192 |
The weighted averages for the more significant actuarial assumptions that have been used at the year-end are:
| Actuarial assumptions | ||
| Consolidated | ||
|
| 2023 | 2022 |
| Discount rate (%) | 3.88 | 3.95 |
| Expected average retirement age (years) | 64 | 64 |
| Life expectancy for a 45-year-old male (years) | 81 | 81 |
| Life expectancy for a 45-year-old female (years) | 85 | 85 |
| Claim rates under medical plans (%) | 5 | 5 |
| Expected rate of salary/wage increase (%) | 3 | 3 |
| Change in health care costs (%) | 5 | 5 |
| Index for future compensation increases (%) | 2 | 2 |
| Future contributions | |
| Consolidated | |
| SEK millions | 2024 |
| Expected employer contributions to the plan for the next calendar year | -206 |
| Expected employer contributions for the next calendar year to multi-employer plans reported as defined contribution plans | -104 |
The following table presents how the defined benefit pension schemes are distributed on different countries.
| Regional split | |||||||||
| Consolidated | |||||||||
| SEK millions, unless otherwise stated | United States | United Kingdom | Netherlands | Germany | Norway | Italy | Belgium | Other | Total |
| Net defined benefit liability |
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| Present value of the defined benefit obligation, unfunded | -454 | – | – | -159 | -9 | -14 | – | -290 | -926 |
| Present value of the defined benefit obligation, funded | – | -2,562 | -553 | – | -757 | – | -187 | -298 | -4,357 |
| Present value of the defined benefit obligation at year end | -454 | -2,562 | -553 | -159 | -766 | -14 | -187 | -588 | -5,283 |
| Fair value of plan assets | – | 2,619 | 554 | – | 817 | – | 187 | 261 | 4,438 |
| Net defined benefit liability | -454 | 57 | 1 | -159 | 51 | -14 | 0 | -327 | -845 |
| Less disallowed assets due to asset ceiling | – | -5 | -1 | – | – | – | – | – | -6 |
| (-) liability/(+) asset | -454 | 52 | 0 | -159 | 51 | -14 | 0 | -327 | -851 |
| Net plan cost | 19 | -4 | 0 | -6 | -4 | -1 | -10 | 38 | 32 |
| Remeasurements (OCI) | -29 | -57 | 0 | -2 | -31 | – | 2 | -9 | -126 |
| Sensitivity analysis* |
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| Discount rate decreased by 1% point | -39 | -356 | -93 | -14 | -93 | – | -3 | -171 | -769 |
| Life expectancy increased by 1 year | -12 | -110 | -18 | -9 | -7 | – | 0 | -9 | -165 |
| Expected average retirement age decreased by 1 year | -7 | – | – | 0 | 0 | – | 0 | 2 | -5 |
| Claim rates under medical plans increased by 1 % point | 0 | – | – | – | – | – | – | – | 0 |
| Expected rate of salary increases increased by 1% point | – | -21 | – | – | -6 | – | -8 | -114 | -149 |
| Medical costs increased by 1% point | -1 | – | – | – | – | – | – | 0 | -1 |
| Index for future compensation increases increased by 1% point | – | -48 | -30 | -13 | -90 | – | – | -2 | -183 |
| Cost for actuarial services | -2 | -4 | 0 | 0 | 0 | 0 | 0 | -1 | -7 |
| Number of participants in the plans at December 31 |
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| Current employees (active members) | 1,067 | 32 | 10 | 5 | 48 | – | 141 | 3,211 | 4,514 |
| Current employees (only vested value for closed plans) | – | – | 24 | 4 | – | 96 | – | 7 | 131 |
| Former employees that are not yet pensioners | – | 302 | 310 | 2 | – | – | 161 | – | 775 |
| Pensioners | 678 | 680 | 117 | 198 | 412 | – | – | 65 | 2 150 |
| Total | 1,745 | 1,014 | 461 | 209 | 460 | 96 | 302 | 3,283 | 7,570 |
| Remaining service period |
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| Average remaining service period for active members (years) | 10 | 13 | 11 | 3 | 3 | – | 18 | 12 | 12 |
| * How much would the present value of the defined benefit obligation at December 31 increase if the (all other things being equal): | |||||||||