Note 22

Provisions for pensions and similar obligations

Addtech has defined-contribution and defined-benefit pension plans in Sweden, Switzerland and the UK. The plans cover a large number of employees. Subsidiaries in other countries have mainly defined-contribution pension plans. The Parent Company’s data on pensions are reported in accordance with the Swedish Act on Safeguarding Pension Obligations.

DEFINED-CONTRIBUTION PLANS
These plans are mainly retirement pension plans, disability pensions and family pensions. Premiums are paid on an ongoing basis during the year by each Group company and the size of the premium is based on the salary. The pension cost for the period is included in profit or loss.

Obligations for retirement pensions and family pensions for salaried employees in Sweden are secured by insurance in Alecta. According to statement UFR 3 of the Swedish Financial Reporting Board, this is a defined-benefit plan covering multiple employers. For the 2019/2020 financial year, the Company did not have access to information enabling it to report this plan as a defined-benefit plan. Thus the pension plan according to ITP2 and secured by insurance in Alecta is recognised as a defined-contribution plan. The year’s fees for pension insurance with Alecta totalled SEK 31 million (30). Fees for the next financial year are considered to be in line with those for the year reported. The collective consolidation level for Alecta was 133 percent (144) in March 2020. The pension plan according to ITP1 is recognised as a defined-contribution plan.

DEFINED-BENEFIT PLANS
These pension plans primarily comprise retirement pensions. Each employer generally has an obligation to pay a lifelong pension and vesting is based on the number of years of employment. The employee must subscribe to the plan for a certain number of years to be fully entitled to retirement benefits. Each year increases the employee’s entitlement to retirement benefits, which is recognised as pension earned during the period and as an increase in pension obligations. Both funded and unfunded pension plans apply in Sweden, Switzerland and the UK. The funded pension obligations are secured by plan assets that are managed by insurance companies. The Group estimates that SEK 4 million (1) will be paid in 2020/2021 to the funded defined-benefit plans. The total number of commitments of 963 (902) included in the obligation consists of 132 active (71), 488 paid-up policy holders (518) and 343 pensioners (313).

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			Group		Parent Company
Pension liability as per balance sheet			2020-03-31	2019-03-31	2020-03-31	2019-03-31
Pension liability PRI			270	250	15	15
Other pension obligations			62	10	–	–
Total cost of defined benefit plans			332	260	15	15

			Group		Parent Company
Obligations for defined benefits and the value of plan assets			2020-03-31	2019-03-31	2020-03-31	2019-03-31
Funded obligations:
Present value of funded defined benefit obligations			255	53	–	–
Fair value of plan assets			-193	-43	–	–
Net debt, funded obligations			62	10	–	–

Present value of unfunded defined benefit obligations			270	250	15	15
Net amount in the balance sheet (obligation +, asset –)			332	260	15	15

Pension obligations and plan assets per country:
Sweden
Pension obligations			303	281	15	15
Plan assets			-25	-23	–	–
Net amount in Sweden			278	258	15	15

Switzerland
Pension obligations			200	–	–	–
Plan assets			-149	–	–	–
Net amount in Switzerland			51	–	–	–

Great Britain
Pension obligations			22	22	–	–
Plan assets			-19	-20	–	–
Net amount in Great Britain			3	2	–	–

Net amount in the balance sheet (obligation +, asset –)			332	260	15	15

			Group		Parent Company
Reconciliation of net amount for pensions in the balance sheet			2019/2020	2018/2019	2019/2020	2018/2019
Opening balance			260	229	15	15
Cost defined benefit plans			13	8	1	1
Payment of pension benefits			-7	-7	-1	-1
Funds contributed by employer			-4	-1	–	–
Acquisition of companies			12	31	–	–
Translation effects			54	–	–	–
Revaluations			4	0	–	–
Gains and losses from settlements			0	0	–	–
Net amount in balance sheet (obligation +, asset -)			332	260	15	15

					Group
Changes in the obligation for defined benefit plans recognised in the balance sheet					2019/2020	2018/2019
Opening balance					303	273
Pensions earned during the period					7	2
Pensions earned prior periods, vested					–	0
Interest on obligations					7	7
Benefits paid					-5	-8
Funds contributed by employee					3	–
Revaluations:
Gain (-)/loss (+) resulting from demographic assumptions					–	–
Gain (-)/loss (+) resulting from financial assumptions					20	25
Experienced-based gains (-)/losses (+)					-14	5
Acquisition of companies					189	–
Translation effects					15	1
Gains and losses from settlements					–	-2
PRESENT VALUE OF PENSIONS OBLIGATIONS					525	303

					Group
Changes in plan assets					2019/2020	2018/2019
Opening balance					43	44
Funds contributed by employer					4	1
Funds contributed by employee					3	–
Benefits paid					2	-1
Interest income recognised in profit or loss					1	1
Return on plan assets, excluding interest income					-6	-1
Acquisition of companies					135	–
Translation effects					11	1
Gains and losses from settlements					–	-2
Fair value of plan assets					193	43

			Group		Parent Company
Pension costs			2019/2020	2018/2019	2019/2020	2018/2019
Defined-benefit pension plans
Cost for pensions earned during the year			7	2	1	–
Revenue for pensions earned in prior periods				0	–	–
Interest on obligations			7	7	0	1
Interest income recognised in profit or loss			-1	-1	–	–
Total cost of defined benefit plans			13	8	1	1
Total cost of defined contribution plans			157	139	7	7
Social security costs on pension costs			19	17	1	1
Total cost of benefits after termination of employment			189	164	9	9

					Group
Allocation of pension costs in the income statement					2019/2020	2018/2019
Cost of sales					37	32
Selling and administrative expenses					146	126
Net financial items					6	6
Total pension costs					189	164

	2019/2020			2018/2019
Actuarial assumptions	Sweden	Switzerland	Great Britain	Sweden	Switzerland	Great Britain
The following material actuarial assumptions were applied in calculating obligations:
Discount rate, 1 April, %	2.10	–	2.86	2.55	–	3.08
Discount rate, 31 March, %	1.30	0.45	2.81	2.10	–	2.86
Future salary increases, %	2.25	1.00	–	2.75	–	–
Future increases in pensions (change in income base amount), %	1.20	0.00	2.61	1.80	–	3.08
Employee turnover, %	10.0	–	–	10.0	–	–
Expected ‘G regulation’, %	–	–	–	–	–	–
Mortality table	DUS14	BVG 2015 GT	S3PMA/S3PFA	DUS14	–	S2PMA/S2PFA

Sensitivity of pension obligations to changes in assumptions			Sweden	Switzerland	Great Britain	Total
Defined benefit pension obligations at 31 March 2020			303	200	22	525
The discount rate increases by 0.5%			-30	-18	-2	-50
The discount rate decreases by 0.5%			35	19	2	56
Expected life expectancy increases by 1 year			15	–	1	16
Expected life expectancy decreases by 1 year			-15	–	-1	-16

The discount rate used is equivalent to the interest rate on high-quality corporate bonds or mortgage bonds with a maturity equivalent to the average maturity of the obligation and currency.

For Swedish pension liabilities, the interest rate for Swedish housing bonds is used as a basis and for pension liabilities in Switzerland and the UK, the interest rate for corporate bonds is used. The weighted average maturity for the commitment is around 18 years (18), which is used as a basis on which to determine the discount rate. Future increases in pensions are based on inflation assumptions. In Sweden, the remaining period of employment (life expectancy) is based on DUS 14, statistical tables prepared by Insurance Sweden and Försäkringssällskapet (the Insurance Society), in Switzerland on BVG 2015, and in the UK on S3PA, CMI 2019.

The sensitivity analyses are based on a change in an assumption, while all other assumptions are held constant. The same method, the projected unit credit method, is used to calculate the sensitivity in the defined-benefit obligation as to calculate the pension obligation recognised in the balance sheet.