32. Provisions for post-employment benefits plans and similar obligations

€ million

30/9/2018

30/9/2019

Provisions for post-employment benefits plans (employer’s commitments)

344

414

Provisions for indirect commitments

12

17

Provisions for voluntary pension benefits

0

0

Provisions for post-employment benefit plans

71

78

 

427

509

Provisions for obligations similar to pensions

41

34

 

468

543

Provisions for post-employment benefits plans are recognised in accordance with IAS 19 (Employee Benefits).

Provisions for post-employment benefits plans consist of commitments primarily related to benefits defined by the provisions of company pension plans. These take the form of defined benefit plans directly from the employer (employer’s commitments) and defined benefit plans from external pension providers (benevolent funds in Germany and international pension funds). The external providers’ assets serve exclusively to finance the pension entitlements and qualify as plan assets. The benefits under the different plans are based on performance and length of service.

The most important performance-based pension plans are described in the following.

Germany

METRO grants many employees in Germany retirement, disability and surviving dependant’s benefits. New commitments are granted in the form of ‘defined benefit’ commitments in the meaning of IAS 19 (contribution-oriented commitments pursuant to German company pension law), which comprise a payment contribution component and an employer-matching component. Contributions are paid to a pension reinsurance from which benefits are paid out when the insured event occurs. A provision is recognised for entitlements not covered by pension reinsurance.

In addition, various pension funds exist that are closed for new contributions. In general, these provide for lifelong pensions starting with the start of retirement or recognised invalidity. Benefits are largely defined as fixed payments or on the basis of set annual increases. In special cases, benefits are calculated in consideration of accrued statutory pension entitlements. The commitments provide for a widow’s or widower’s pension of varying size, depending on the benefits the former employee received or would have received in case of invalidity. Legacy commitments are partially covered by assets held in benevolent funds. Provisions are recognised for those commitments not covered. The benevolent funds’ decision-making bodies (management board and general assembly of members) comprise both employer and employee representatives. The respective members of the Management Board decide on the deployment of funds and financial investments. It may commission third parties to manage fund assets. No statutory minimum endowment obligations exist. Insofar as pledged benefits cannot be paid out of the benevolent fund assets, the employer is obliged to directly assume these payments.

There are also deferred compensation contracts with the ‘Hamburger Pensionskasse’ (Hamburg pension fund).

Netherlands

A defined benefit pension plan exists in the Netherlands which provides for pension payments in addition to invalidity and death benefits. The amount of the benefits depends on the pensionable salary per year of service. Benefits are funded through a pension fund whose decision-making bodies (management board, as well as administration, finance and investment committee) include employer and employee representatives. The fund’s management board has responsibility for asset management. The pension fund’s investment committee exists for this purpose. In line with statutory minimum funding requirements, the pension fund’s management board must ensure that commitments are covered by assets at all times. In case of underfunding, the pension fund’s management board may take different measures to compensate for deficient cover. These measures include the requirement for additional contributions by the employer and curtailments in employee benefits.

United Kingdom

In July 2012, the former METRO GROUP sold its cash-and-carry business in the United Kingdom to Booker Group PLC. Pension commitments were not part of the sale. Since the date of the disposal, only vested benefits and current pensions from service years at the former METRO GROUP have existed. In accordance with legal stipulations, the vested interests must be adjusted for inflation effects. The commitments are covered by assets which are managed and invested by a corporate trustee. A major share of these commitments was fully funded through a buy-in. The management board of this corporate trustee consists of employer and employee representatives. In any case, the trustee must ensure that benefits can be paid at all times in the future. This is regulated on the basis of statutory minimum financing requirements. In case of underfunding, the trustee may require additional employer contributions to close the funding gap.

Belgium

There are both retirement pensions and capital commitments; the amount depends on the pensionable length of service and pensionable income. In addition, groups of employees are granted interim allowances. In principle, benefits are funded through group insurance contracts that are subject to Belgian regulatory law.

Additional retirement plans are reported cumulatively under other countries.

The following table provides an overview of the present value of defined benefit obligations by METRO countries as well as material obligations:

€ million

30/9/2018

30/9/2019

Germany

374

448

Netherlands

469

611

United Kingdom

211

241

Belgium

88

85

Other countries

109

131

 

1,251

1,516

The plan assets of METRO are distributed between the following countries:

€ million

30/9/2018

30/9/2019

Germany

71

81

Netherlands

584

671

United Kingdom

209

237

Belgium

50

52

Other countries

26

25

 

940

1,066

The above commitments are valued on the basis of actuarial calculations in accordance with relevant provisions of IAS 19. The basis for the measurement is the legal and economic circumstances prevailing in each country.

The following assumptions regarding the material parameters were used in the actuarial measurements:

 

30/9/2018

30/9/2019

%

Germany

Nether­lands

United Kingdom

Belgium

Germany

Nether­lands

United Kingdom

Belgium

Actuarial interest rate

2.20

2.40

2.70

2.20

1.00

1.20

2.00

1.20

Pension trend

1.50

0.90

2.40

2.00

1.50

0.70

2.50

2.00

As in , METRO used generally recognised methods to determine the actuarial interest rate. With these, the respective actuarial interest rate based on the yield of investment grade corporate bonds is determined as of the closing date taking account of the currency and maturity of the underlying obligations. The actuarial interest rate for the Eurozone and the UK is based on the results of a method applied in a uniform manner across the group. The interest rate for this is set on the basis of the returns of high-quality corporate bonds and the duration of commitments. In countries without a liquid market of suitable corporate bonds, the actuarial interest rate was determined on the basis of government bond yields.

Aside from the actuarial interest rate, the pension trend represents another key actuarial parameter. In Germany, the rate of pension increases is derived directly from the inflation rate insofar as pension adjustments can be determined on the basis of the increase in the cost of living. In international companies, pension adjustments are also generally determined on the basis of the inflation rate.

The other parameters are not relevant for the measurement of pension obligations. The impact of changes in fluctuation and mortality assumptions was analysed for major plans. As of 30 September 2019, the mortality rate for the German group companies are based on the 2018 G tables from Prof. Dr Klaus Heubeck.

The actuarial measurements outside of Germany are based on country-specific mortality tables. The resulting effects of fluctuation and mortality assumptions have been deemed immaterial and are not listed as a separate component.

The results of a sensitivity analysis for the key measurement parameters with respect to the present value of pension entitlements are presented below. The actuarial interest rate and the pension trend were identified as key parameters with an impact on the present value of pension entitlements. The sensitivity analysis used the same methods as were applied in the previous year. The analysis considered changes in parameters that are considered possible within reason. The selection of the respective spectrum of possible changes in parameters is based on historical multi-year observations.

The following illustrates the impact of an increase/decrease in the actuarial interest rate by 100 basis points or an increase/decrease in the pension trend by 25 basis points. For interpretation of the values, it should be noted that the obligations in the Netherlands and the United Kingdom are backed to a large extent and that the plan assets also regularly show a compensating sensitivity with regard to the development of the general interest rate level.

 

 

30/9/2018

30/9/2019

€ million

 

Germany

Nether­lands

United Kingdom

Belgium

Germany

Nether­lands

United Kingdom

Belgium

Actuarial interest rate

Increase by 100 basis points

−46

−89

−33

−3

−59

−126

−38

−4

Decrease by 100 basis points

58

123

43

5

77

175

50

6

Pension trend

Increase by 25 basis points

9

13

5

0

12

19

7

0

Decrease by 25 basis points

−9

−13

−6

0

−11

−18

−6

0

Changes in the present value of defined benefit obligations have developed as follows:

€ million

2017/18

2018/19

Present value of defined benefit obligations

 

 

As of the beginning of the period

1,342

1,251

Recognised under

55

50

Interest expenses

30

29

Current service cost

25

21

Past service cost (incl. curtailments and changes)

0

0

Settlement expenses

0

0

Recognised outside of profit or loss under ‘remeasurement of defined benefit pension plans’ in other comprehensive income

−39

251

Actuarial gains/losses from changes in

 

 

demographic assumptions (−/+)

−4

10

financial assumptions (−/+)

−20

237

experience-based correction (−/+)

−15

4

Other effects

−107

−36

Benefit payments (incl. tax payments)

−59

−48

Contributions from plan participants

11

9

Change in consolidation group / transfers

0

1

Reclassifications in accordance with IFRS 5

−55

0

Currency effects

−4

2

As of end of period

1,251

1,516

Changes in parameters on the basis of actuarial calculations led to a total increase in the present value of defined benefit obligations by €247 million (2017/18: €−24 million). Most of the effects result from the reduction of the applied invoice rates.

The weighted average term of defined benefit commitments for the countries with material pension obligations amounts to:

Years

30/9/2018

30/9/2019

Germany

16

16

Netherlands

22

24

United Kingdom

18

18

Belgium

4

6

Other countries

11

11

The present value of defined benefit obligations can be broken down as follows based on individual groups of eligible employees:

%

30/9/2018

30/9/2019

Active members

32

34

Former claimants

38

38

Pensioners

30

28

The granting of defined benefit pension entitlements exposes METRO to various risks. These include general actuarial risks resulting from the measurement of pension commitments (for example, interest rate risks) as well as capital and investment risks related to plan assets.

With a view to the funding of future pension payments from indirect commitments and a stable actuarial reserve, METRO primarily invests plan assets in low-risk investment forms. The funding of direct pension commitments is secured through operating cash flow at METRO.

The of plan assets by asset category can be broken down as follows:

 

30/9/2018

30/9/2019

 

%

€ million

%

€ million

Fixed-interest securities

36

337

38

407

Shares, funds

26

247

25

264

Real estate

4

36

5

50

Other assets

34

320

32

345

 

100

940

100

1,066

Fixed-interest securities, shares and funds are regularly traded in active markets. As a result, the relevant market prices are available. The asset category ‘fixed-interest securities’ only includes investments in investment grade corporate bonds, government bonds and mortgage-backed bonds (Investment Grade). Risk within the category shares, funds is minimised through geographic diversification.

The majority of real estate assets are invested in real estate funds.

Other assets essentially comprise receivables from first-class insurance companies in Germany, Belgium and the United Kingdom.

The actual return on plan assets amounted to €125 million in the reporting period (2017/18: €45 million).

For financial year 2019/20, the company expects employer payments to external pension providers totalling approximately €18 million and employee contributions of €9 million in plan assets, with contributions in the Netherlands, Belgium and Germany accounting for the major share of this total. Expected contributions from payment contribution commitments in Germany are not included in expected payments.

The fair value of plan assets developed as follows:

€ million

2017/18

2018/19

Change in plan assets

 

 

Fair value of plan assets as of beginning of period

905

940

Recognised under

21

23

Interest income

21

23

Recognised outside of profit or loss under ‘remeasurement of defined benefit pension plans’ in other comprehensive income

24

102

Gains/losses from plan assets excl. interest income (+/−)

24

102

Other effects

−10

0

Benefit payments (incl. tax payments)

−34

−27

Settlement payments

−6

0

Employer contributions

35

18

Contributions from plan participants

11

9

Change in consolidation group / transfers

0

0

Reclassification in accordance with IFRS 5

−16

0

Currency effects

0

1

Fair value of plan assets as of end of period

940

1,066

€ million

30/9/2018

30/9/2019

Financing status

 

 

Present value of defined benefit obligations

1,251

1,516

less the fair value of plan assets

940

1,066

Asset adjustment (asset ceiling)

115

59

Net liability / assets

427

509

thereof recognised under provisions

(427)

(509)

thereof recognised under net assets

(0)

(0)

At one Dutch company, plan assets exceeded the value of commitments as of the closing date. Since the company cannot draw any economic benefits from this overfunding, the balance sheet amount was reduced to €0 in line with IAS 19.64 (b).

The change in the effect of the asset ceiling in the amount of €58 million (2017/18: €−46 million) was largely recognised in other comprehensive income as a loss from remeasuring.

The pension expenses of the direct and indirect company pension plan commitments can be broken down as follows:

€ million

2017/18

2018/19

1

Netted against employees’ contributions.

2

Included therein: Interest effect from the adjustment of the asset ceiling.

Current service cost1

24

21

Net interest expenses2

11

9

Past service cost (incl. curtailments and changes)

0

0

Settlements

0

0

Other pension expenses

1

1

Pension expenses

36

31

The entire loss to be recognised outside of profit or loss in the other comprehensive income amounts to €90 million in financial year 2018/19. This figure is comprised of the effect from the change in actuarial parameters in the amount of €+247 million and the experience-based adjustments of €+4 million. It was offset by income from plan assets of €103 million and a gain of €58 million resulting from the change in the effect of the asset ceiling in the Netherlands.

In addition to expenses from defined benefit commitments, expenses for payments to external pension providers relating to defined contribution pension commitments of €82 million in financial year 2018/19 (2017/18: €82 million) were recorded. These figures also include payments to statutory pension insurance.

The provisions for obligations similar to pensions essentially comprise commitments from employment anniversary allowances, death benefits and partial retirement plans. Provisions amounting to €34 million (30/9/2018: €41 million) were allocated for these commitments. The commitments are valued on the basis of actuarial expert opinions. The valuation parameters used for this purpose are generally determined in the same way as for the company pension plan.

Previous year
Period of 12 months, usually cited as reference for statements in an annual report.
Glossary
Fair value
Recognised fair value. Amount that would have been received in return for the disposal of an asset or paid for the assignment of a debt in an ordinary transaction conducted between market participants on the assessment date.
Glossary