AAK Annual Report 2020

AAK Annual Report 2020 89 Note 9 | Provisions for pensions and similar obligations Defined benefit plans The Group maintains defined benefit retirement plans in which employees earn the right to payment of benefits after completing their employment, based on their final salary and period of service. These defined benefit retirement plans exist in Sweden, the Netherlands, Belgium, and India. The obligations for retirement and survivors’ pension for salaried employees in Sweden are insured through policies with Alecta or correspondingly in Folksam. According to the state- ment UFR 10 by the Swedish Financial Reporting Board, this is a defined benefit plan that involves several different employers. For the period from January 1 to December 31, 2020, AAK AB and AAK Sweden AB have not had access to sufficient information to recognize their proportional shares of the plan’s obligations, plan assets and costs, which has meant that it has not been possible to recognize the plan as a defined benefit plan. The ITP 2 pension plan that is insured through Folksam is therefore recognized as a defined contribution plan. The premium for the defined benefit retirement and survivors’ pension is calculated individually and depends on factors including salary, pension earned previously and expected remaining period of service. Charges for ITP 2 pensions insured through Folksam are SEK 14 million (17). The collective consolidation level consists of the market value of Alecta’s assets as a percent- age of the estimated insurance commitments, computed using Alecta’s actuarial methods and assumptions, which are not in accordance with IAS 19. The collective consolidation level should normally be permitted to vary between 125 and 155 percent. If Alecta’s collective con- solidation level is below 125 percent or above 155 percent, measures must be taken to create the conditions for the consolidation level to return to the normal range. If the consolidation is low, one measure may be to increase the agreed price for new policies and increasing existing benefits. If the consolidation is high, one measure may be to introduce premium reductions. At year-end 2020, Alecta’s and Folksam’s surplus in the form of their collective consoli- dation levels was 148 percent and 191 percent, respectively (148 percent and 187 percent, respectively). The Group has defined benefit pension plans in Sweden and the Netherlands which come under largely similar regulations. All plans are pension plans based on final salary and give employees covered by the plans benefits in the form of a guaranteed level of pension payments during their lives. The level of the benefits depends on the employees’ period of service and salary on retirement. The pension payments in the Swedish and Dutch plans are normally indexed according to the consumer price index. The plans are subject to largely similar risks. Benefits are paid from plans that are secured with foundations. The activities of the foundations are regulated by national regulations and practice which also apply to the relationship between the Group and the administrator (or equivalent) of the foundation’s plan assets. Responsibility for monitoring the plans, including investment decisions and contribu- tions, is held jointly by the company and the foundation’s board. 2020 2019 Specification of costs Costs for services during current year 40 36 Interest expenses 13 18 Anticipated return on plan assets -11 -13 Employee contributions -4 -6 Total cost of defined benefit plans, included in Employee benefits (Note 6) 38 35 Cost of defined contribution plans 95 110 Total pension costs 133 145 Net defined benefit liability in the Balance Sheet Present value of funded obligations 1,113 1,054 Fair value of plan assets -835 -813 Net defined benefit liability 278 241