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 “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. Given the plans to harmonise the existing pension schemes in 2018, the pension obligations attributable to the company’s active employees are to be transferred to the new pension scheme, see Note 37.

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

 

31.12.2017

 

31.12.2016

Present value of pension commitments

 

426,943

 

442,608

Obligations from working lifetime accounts

 

21,982

 

17,922

 

 

448,925

 

460,530

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

 

2017

 

2016

Present value of pension obligations as of 1 January

 

442,608

 

403,613

Current service expense

 

5,526

 

4,990

Past service expense

 

0

 

1,439

Interest expense

 

6,056

 

8,859

Pension payments

 

- 19,790

 

- 19,364

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

 

- 7,457

 

- 3,707

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

 

0

 

46,778

Present value of pension obligations as of 31 December

 

426,943

 

442,608

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

in %

 

2017

 

2016

Current employees

 

33.9

 

37.1

Former employees

 

1.8

 

1.9

Pensioners

 

64.3

 

61.0

 

 

100.0

 

100.0

As of 31 December 2017, the weighted average term of the defined benefit obligation was 13.4 years (previous year: 13.6 years).

In addition, there are reimbursement rights of € 2,530 thousand (previous year: € 2,609 thousand) which were concluded to cover the corresponding pension obligations. The expected income from these reimbursement rights amounts to € 35 thousand in the year under review, whereas the actual income amounts to € 48 thousand.

Pension Commitments Recognised in the Income Statement

in € thousand

 

2017

 

2016

Current service expense

 

5,526

 

4,990

Past service expense

 

0

 

1,439

Interest expenses

 

6,056

 

8,859

 

 

11,582

 

15,288

Development of Actuarial Gains/Losses from Pensions Commitments

in € thousand

 

2017

 

2016

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

 

- 82,881

 

- 39,810

Changes in the financial year due to amendments in experience-based assumptions

 

7,457

 

3,707

Changes in the financial year due to amendments in financial assumptions

 

0

 

- 46,778

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

 

- 75,424

 

- 82,881

Actuarial Assumptions to Determine Pension Provisions

in %

 

31.12.2017

 

31.12.2016

Discount rate

 

1.40

 

1.40

Projected salary increase

 

3.00

 

3.00

Adjustment of Social Security Pension according to Pension Insurance Report

 

2017

 

2016

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

 

 

 

 

31.12.2017

 

31.12.2016

 

in € thousand

 

31.12.2017

 

31.12.2016

Discount rate

 

Increase of

 

0.5 %

 

0.5 %

 

Decrease of

 

27,145

 

28,579

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Increase of

 

30,319

 

31,957

Payment trend

 

Increase of

 

0.5 %

 

0.5 %

 

Increase of

 

3,724

 

4,490

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Decrease of

 

3,653

 

4,394

Adjustment to state pension

 

Decrease of

 

20.0 %

 

20.0 %

 

Increase of

 

1,628

 

1,983

Expected mortality

 

Decrease of

 

10.0 %

 

10.0 %

 

Increase of

 

17,553

 

18,063

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 2017 financial year, HHLA made pension payments for plans totalling € 19,790 thousand (previous year: € 19,364 thousand). HHLA anticipates the following payments for pension plans over the next five years.

Expected Pension Payments

in years in € thousand

 

 

2018

 

20,558

2019

 

20,798

2020

 

20,859

2021

 

20,837

2022

 

20,788

 

 

103,840

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 3.00 % 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.

Given the plans to harmonise the existing pension schemes in 2018, the existing funds from the working lifetime accounts are to be transferred to the new pension scheme, replacing the obligations from working lifetime accounts, see Note 37.

Allocation of Benefit Commitments

in € thousand

 

31.12.2017

 

31.12.2016

Present value of obligations

 

35,272

 

30,832

Present value of plan assets (fund shares)

 

- 13,290

 

- 12,910

Uncovered allocations

 

21,982

 

17,922

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

in € thousand

 

2017

 

2016

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

 

30,832

 

24,767

Contributions of plan participants

 

1,846

 

3,205

Current service expense

 

148

 

405

Interest expenses

 

536

 

598

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

 

2,318

 

926

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

 

0

 

1,413

Capital payments

 

- 408

 

- 482

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

 

35,272

 

30,832

As of 31 December 2017, the weighted average term of the defined benefit obligation was 18.8 years (previous year: 19.2 years).

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

in € thousand

 

2017

 

2016

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

 

12,910

 

12,772

Expected income from plan assets

 

217

 

290

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

 

402

 

203

Capital payments

 

- 239

 

- 355

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

 

13,290

 

12,910

The plan assets consist solely of shares in money market and investment funds. Gains of € 384 thousand were recorded on the plan assets in the financial year (previous year: € 163 thousand).

Working Lifetime Accounts recognised in the Income Statement

in € thousand

 

2017

 

2016

Current service expense including salary conversion

 

148

 

405

Interest expenses

 

536

 

598

Expected income from the plan assets

 

- 217

 

- 290

 

 

467

 

713

Development of Actuarial Gains/Losses from Working Lifetime Accounts

in € thousand

 

2017

 

2016

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

 

- 2,963

 

- 827

Changes in the financial year due to amendments in experience-based assumptions

 

- 1,916

 

- 723

Changes in the financial year due to amendments in financial assumptions

 

0

 

- 1,413

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

 

- 4,879

 

- 2,963

Actuarial Assumptions to determine Provisions from Working Lifetime Accounts

in %

 

31.12.2017

 

31.12.2016

Discount rate

 

1.70

 

1.70

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.

Sensitivity Analysis: Working Lifetime Accounts

 

 

Change in parameter

 

Effect on present value

 

 

 

 

31.12.2017

 

31.12.2016

 

in € thousand

 

31.12.2017

 

 

 

31.12.2016

Discount rate

 

Increase of

 

0.5 %

 

0.5 %

 

Decrease of

 

1,663

 

Decrease of

 

1,345

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Increase of

 

1,890

 

Increase of

 

1,534

Payment trend

 

Increase of

 

0.5 %

 

0.5 %

 

Increase of

 

86

 

Increase of

 

76

 

 

Decrease of

 

0.5 %

 

0.5 %

 

Decrease of

 

95

 

Decrease of

 

84

Expected mortality

 

Decrease of

 

10.0 %

 

10.0 %

 

Increase of

 

35

 

Increase of

 

31

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.

Until 31 December 2013, the obligations from working lifetime accounts were financed by paying a portion of employees’ remuneration into the unit-linked pension plan. Capital has been invested within the company since 1 January 2014.

Portfolio for Obligations from Working Lifetime Accounts

in %

 

2017

 

2016

Money market funds

 

100

 

51

Mixed funds

 

0

 

33

Funds of funds

 

0

 

15

Annuity funds

 

0

 

1

 

 

100

 

100

The portfolio structure was adjusted in light of the plans to harmonise the existing pension schemes in 2018.

Payments for Obligations from Working Lifetime Accounts

In the financial year under review, HHLA made payments for plans totalling € 408 thousand (previous year: € 482 thousand). In return, the company acquired corresponding securities holdings worth € 239 thousand (previous year: € 355 thousand). The outflow of funds therefore amounted to € 169 thousand in the year under review (previous year: € 127 thousand).

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

in years in € thousand

 

 

2018

 

548

2019

 

394

2020

 

503

2021

 

477

2022

 

589

 

 

2,511

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 € 4,488 thousand in the reporting year (previous year: € 5,087 thousand).

HHLA paid € 27,636 thousand (previous year: € 26,794 thousand) into the state pension system as its employer’s contribution.