28. Post-Employment Benefits

The amounts recognized in the Balance Sheet are determined as follows:

in thousands of EUR

31 December 2016

31 December 2015

Present value of benefit obligation

4,521

4,599

Fair value of plan assets

- 1,939

- 2,505

Net position

2,582

2,094

Present value of unfunded obligation

73,111

62,610

Provision in the Balance Sheet

75,693

64,704

The most recent actuarial valuations were performed in December 2016.

The defined benefit obligation of the unfunded plans mainly relate to:

  • A pension arrangement, in addition to the state pension provided in Germany, for employees already employed with Apollo prior to 1994 (2016: €55.5 million; 2015: €47.0 million). Every service year of the employees in the plan adds an amount of 1% of their pensionable salaries to the plan. This occurs for a maximum of 25 years and is maximized in terms of pay-out.
  • The Italian Trattamento di Fine Rapporto program (2016: €5.4 million; 2015: €5.7 million) for service years until 2012. For service years since 2013 the Trattamento di Fine Rapporto is paid to a pension fund or a state agency as a defined contribution.
  • An end-of-employment plan for French employees (2016: €11.9 million; 2015: €9.6 million). This is based on service years and calculated according to the estimated remuneration in the last year of employment.

These three plans are unfunded and thus both the pay-out and the actuarial risks are the responsibility of the Company. The risks of these plans are mainly related to changes in the discount rate applied to determine the defined benefit obligation.

The amounts recognized in the Income Statement are as follows:

in thousands of EUR

Notes

2016

2015

Current service costs

1,964

4,037

Interest expense

1,597

1,527

Plan amendments/curtailments/settlements

- 15

- 10

Administrative costs

- 26

6

Change of pension plan

-

- 17,667

Total defined benefit costs

8

3,520

- 12,107

The movement in the defined benefit obligation over the year was as follows:

in thousands of EUR

Present value of obligation

Fair value of plan assets

Total

At 1 January 2015

239,440

- 153,591

85,849

Current service costs

4,037

-

4,037

Interest expense/ (income)

2,530

- 1,003

1,527

Employee contributions

642

- 642

-

Employer contributions

-

- 3,944

- 3,944

Experience adjustments

1,151

-

1,151

Change in financial assumptions

6,787

-

6,787

Change in demographic assumptions

- 21

-

- 21

Plan amendments and curtailments

- 10

-

- 10

Return on plan assets, excluding amounts in interest

-

- 13,044

- 13,044

Benefits paid

- 2,063

2,063

-

Change of pension plan

- 185,071

167,404

- 17,667

Other

- 6

187

181

Exchange effect

- 207

65

- 142

At 31 December 2015

67,209

- 2,505

64,704

At 1 January 2016

67,209

- 2,505

64,704

Current service costs

1,964

-

1,964

Interest expense/ (income)

1,760

- 163

1,597

Employer contributions

-

- 1,503

- 1,503

Experience adjustments

593

-

593

Change in financial assumptions

8,521

-

8,521

Change in demographic assumptions

- 15

-

- 15

Plan amendments and curtailments

- 15

-

- 15

Return on plan assets, excluding amounts in interest

-

134

134

Benefits paid

- 1,783

1,783

-

Exchange effect

- 602

315

- 287

At 31 December 2016

77,632

- 1,939

75,693

During 2015, the Group has amended the pension plan in the Netherlands. This resulted in a change of classification from defined benefit to defined contribution. The pension provision for the employee benefit arrangement in the Netherlands was accordingly released in the Income Statement for an amount of €17,667.

Assumptions

The principal actuarial assumptions used were as follows:

2016

2015

Discount rate

1.9%

2.6%

Expected return on plan assets

8.0%

7.3%

Future salary increases

2.9%

3.2%

Future inflation

1.8%

1.8%

The difference between the discount rate and the expected return on plan assets is caused by the weighted impact of funded and unfunded plans. The percentage on the expected return on plan assets originates from Mexico.

The most recent available mortality tables have been used in determining the pension liability. Experience adjustments have been made. The assumptions are based on historical experiences. The expected return on plan assets is based on the expected return on high-quality corporate bonds.

A 1% increase in the discount rate used to calculate the defined benefit obligation would result in 16% decrease in the defined benefit obligation. A 1% decrease in the discount rate used to calculate the defined benefit obligation would result in 21% increase in the defined benefit obligation. An increase of 0.25% in salary would result in an increase of 1% in the defined benefit obligation. +1 year in life expectancy would result in an increase of 3% in the defined benefit obligation. An increase of 1% in inflation would result in an 11% increase in the defined benefit obligation.

The above sensitivity analyses are based on changing one assumption while all other assumptions remain constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the statement of financial position. 

Plan assets are comprised as follows:

in thousands of EUR

2016

2015

Equities

848

369

Debt instruments

1,091

2,136

Total

1,939

2,505

The expected maturity of the undiscounted pension and post-employment benefits is:

in thousands of EUR

2016

2015

Less than 1 year

1,553

1,776

Between 1 and 2 years

2,620

2,609

Between 2 and 5 years

7,535

6,796

Over 5 years

115,340

119,537

Total

127,048

130,718