Note 5 Pensions and pension liabilities
The parent company and subsidiaries have pension schemes entitling the employees to future pension benefits in the form of defined benefit schemes. The Group's pension schemes meet the requirements in the Norwegian Mandatory Occupational Pension Act.
The pension benefits are based on the number of service years and final wage at retirement age. The full retirement is 70 per cent of pensionable income less calculated disbursements under the Norwegian National Insurance Scheme. The pensionable income is limited upward to 12 times the basic amount under the National Insurance Scheme. The full contribution period is 30 years and the normal retirement age is 67. The pension scheme also includes disability pensions, spouse pensions and children's pensions.
Accrued pension rights are secured chiefly through pension schemes in Statnett SF's pensjonskasse. In addition, the parent company has early retirement pension obligations that are funded through operations.
Contributions to the pension fund are made in accordance with actuarial calculations. The pension assets in Statnett Pensjonskasse are invested primarily in securities. See the table relating to percentage distribution of pension assets in investment categories.
The Group management has separate additional agreements under which the normal retirement age is 65, but with the possibility of retirement after reaching the age of 62. The retirement pension is 66 per cent of the pensionable income. The pensionable income also includes incomes that exceeds 12 times the basic amount under the National Insurance Scheme.
For personnel employed after 1 March 2011, additional agreements will be entered into exceeding 12 times the Norwegian national insurance scheme's basic amount within the framework of the Guidelines relating to terms of employment for senior executives in state-owned enterprises and companies, stipulated on 31 March 2011.
For more information, cf. Note 14 Remuneration/benefits to the Group management. Annual premium payments will be limited to 30 per cent of the salary exceeding 12 G.
The Group is a member of the private contractual early retirement scheme (AFP scheme) that came into force in 2011. The scheme entails that employees will receive a lifelong supplement to the national insurance retirement pension. The pension can be drawn from age 62, also if an employee decides to keep working. The AFP scheme is a defined-benefit multi-company scheme organised through a general office and financed through premiums stipulated as a percentage of the salaries. There is no reliable way of measuring and allocating liabilities and assets under the scheme. Consequently, the scheme is treated as a defined contribution scheme, according to the accounting rules, and premium payments are recognised on a current basis, and no provisions are made in the accounts. The premium for 2012 is 1.75 per cent of overall wage payments between 1G and 7.1G to the company's employees, estimated at NOK 8 million. There is currently no accumulation of funds under the scheme, and premiums are therefore expected to increase in the time ahead.
The old AFP scheme will be discontinued from 1 January 2011. Spekter will remain the Group's contracting party under the scheme which now only applies to personnel born before 1 December 1948 who drew a pension from the scheme on 1 December 2010 at the latest.
Pension liabilities are calculated in accordance with IAS 19 "Employee Benefits". The mortality risk table K2013 , based on the best estimates for the populations in Norway, is applied for 2013 (K2005 for 2012).
The net pension liabilities in the balance sheet are determined after adjustment for deferred recognition in the income statement of the effect of changes in estimates and pension schemes, as well as discrepancies between the actual and expected return on pension assets that have not yet been realised in the income statement. The net pension liabilities are reported as provisions for liabilities.
Employees who leave the enterprise before retirement age receive a paid-up policy. The paid-up policies are managed by the life insurance company Storebrand Livsforsikring AS. From the date the paid-up policy is issued, Statnett is exempt from any obligation to employees to which the paid-up policies apply. Assets and liabilities are measured at the date of issue of the paid-up policies, and are separated from pension assets and liabilities.
An independent actuary calculated the pension liabilities in January 2014 as en estimate of the situation at 31 December 2013.
When calculating the pension liabilities, the National Insurance contributions that the enterprise is required to pay on the payment of direct pensions or the payment of premiums for fund-based schemes are taken into account. The National Insurance contribution is a component of the enterprise's benefit and is recorded as part of the pension liabilities.
Implementation of IAS 19R
As of 1 January 2013, the Group has implemented the amendments in IAS 19 Employee Benefits (adopted by the EU in June 2012 (”IAS 19R”)) and changed its basis for calculation of pension liabilities and pension costs. The Group previously applied the corridor method for recognition of unamortised actuarial gains and losses. According to IAS 19R, the use of the corridor method is no longer permitted, and all actuarial gains and losses must be recognised under other comprehensive income in the income statement. Actuarial gains and losses, as at 1 January 2012 amounting to NOK 771 million, have been set to zero (NOK 144 million as at 1 January 2013). Consequently, pension liabilities increased by NOK 771 million as at 1 January 2012, whereas equity was reduced by NOK 555 million (after tax).
The Group has chosen to present the net interest expenses element as wage and personnel costs, as this provides the best information about the Group’s pension costs.
Return on pension assets was previously calculated using the long-term projected yield on pension assets. Pursuant to IAS 19R, net interest expenses associated with the pension scheme consist of interest on the liability less the return on the assets, both calculated using the discount rate. The difference between actual and recognised return on pension assets is recognised consecutively in other comprehensive income.
The change in recognition principle for unamortised actuarial gains and losses has resulted in virtually unchanged recog- nised pension costs in 2012. The change in actuarial gains/losses of NOK 627 million was recorded as income in other comprehensive income in the fourth quarter of 2012.
Below is an overview of the effects on the accounts as a result of the implementation:
Note 5 Pensjoner og pensjonsforpliktelser Tabell 2b ENG
The expected pension premium for 2014 is NOK 180 million for the parent company and NOK 182 million for the Group
Secured and unsecured pension liabilities and pension assets
The figures below give an estimate of the potential effect of a change in certain assumptions for defined-benefit pension schemes in Norway for Statnett.
The following estimates and estimated pension costs for 2013 are based on the facts and circumstances at 31 December 2013. Actual results may differ significantly from these estimates.
Risk tables for mortality and disability are based on tables in general use in Norway updated with historical data from the life companies' population. These data entail an adjustment of available tables in the form of increased life expectancy and increased disability probability. The average life expectancy for all age groups in the tables used is 80 years for men and 84 years for women. An extract from these tables is shown below. The table shows life expectancy and probability of disability and death within one year for different age groups.
Pension disbursement flow Statnett SF
The average weighted maturity for pension liabilities, related to the main scheme in Statnett SF, is estimated at 21 years based on the pension assumptions at 31 Dec. 2013. Average weighted maturity has been taken into account when choosing discount rate.