30 Provisions

 

 

Dec. 31, 2016

 

Dec. 31, 2015

 

 

 

 

 

 

 

in € million

 

non-current

 

current

 

non-current

 

current

 

 

 

 

 

 

 

 

 

Provisions for pensions and similar obligations

 

522.6

 

 

495.2

 

Provisions for taxes (current income taxes excl. deferred taxes)

 

 

145.5

 

 

148.9

Other provisions

 

 

 

 

 

 

 

 

Environmental remediation

 

19.1

 

1.2

 

21.5

 

3.4

Personnel obligations

 

55.0

 

83.4

 

81.7

 

95.4

Outstanding trade invoices

 

 

60.0

 

 

83.1

Miscellaneous other provisions

 

11.2

 

80.7

 

14.5

 

98.7

 

 

85.3

 

225.3

 

117.7

 

280.6

 

 

607.9

 

370.8

 

612.9

 

429.5

Provisions for Pensions and Similar Obligations

Vonovia has pension obligations towards various employees which are based on the length of service. Defined benefit and defined contribution obligations – for which Vonovia guarantees a certain level of benefit – are financed through provisions for pensions. Vonovia has taken out reinsurance contracts for individual people.

Generally, they are pension benefits that depend on the final salary with percentage increases depending on the number of years of service.

The pension commitments cover 4,002 eligible persons (Dec. 31, 2015: 4,320).

Executives in active service in the companies formerly belonging to the Deutsche Annington Group have the opportunity to participate in the “Pension Instead of Cash Remuneration” model (Versorgungsbezüge anstelle von Barbezügen) in the version dated October 2003. Retirement, invalidity and surviving dependent benefits in the form of a lifelong pension are offered under this deferred compensation model. The retirement benefits can also be paid out as a one-time capital sum.

The 2002 pension scheme (VO 2002) for former GAGFAH employees replaces the pension systems that existed until December 31, 2001. For employees who joined the company prior to 1991, existing claims arising from the previous pension commitment as of December 31, 2001, are protected in the form of a status of possession. After this point, these employees acquire rights to future pension benefits in accordance with VO 2002. With the introduction of VO 2002, the pension regulations for employees joining the company after 1990 was updated with regard to changes in legislation and court rulings. Pension components acquired before the date VO 2002 replaced the previous pension systems remain in existence. As part of VO 2002, retirement, invalidity and surviving dependent benefits are provided in the form of lifelong pensions. The pension is calculated as the sum of annually acquired pension components that form a fixed percentage of salary. Salary components exceeding the income limit for the assessment of contributions to statutory pension insurance are weighted in a quadruple manner. For new pension commitments beginning in 2002, a pension guarantee of 1.0% p.a. is provided. For all other employees, the provisions of Section 16 of the German Occupational Pensions Improvement Act (BetrAVG) apply.

The following overview summarizes the most important basic data of the closed pension plans:

 

 

VO 1 Veba Immobilien

 

VO 91 Eisenbahnges.

 

Bochumer Verband

Type of benefits

 

Retirement, invalidity and surviving dependent benefits

 

Retirement, invalidity and surviving dependent benefits

 

Retirement, invalidity and surviving dependent benefits

Pensionable remuneration

 

Final salary

 

Final salary

 

Not applicable

Max. pension level

 

 

 

 

 

 

Remuneration up to state pension assessment limit

 

25%

 

27%

 

Depends on

Remuneration in excess of state pension assessment limit

 

25%

 

72%

 

individual grouping

Total pension model based on final salary

 

Yes

 

Yes

 

No

Net benefit limit incl. state pension

 

None

 

90%

 

None

Gross benefit limit

 

70%

 

None

 

None

Adjustment of pensions

 

Section 16, (1,2) BetrAVG

 

Section 16, (1,2) BetrAVG

 

Adjustment every 3 years by Bochumer Verband (Management Board resolution)

Supplementary periods

 

Age of 55

 

None

 

Age of 55 (half)

Legal basis

 

Works agreement

 

Works agreement

 

Commitment to executives in individual contracts

Number of eligible persons

 

330

 

375

 

485

 

 

 

 

 

 

 

 

 

VO 60 Eisenbahnges.

 

Viterra commitment to Management Board members (with plan assets)

 

Deferred compensation until 1999

Type of benefits

 

Retirement, invalidity and surviving dependent benefits

 

Retirement, invalidity and surviving dependent benefits

 

Retirement, invalidity and surviving dependent benefits

Pensionable remuneration

 

Final salary

 

Final salary

 

Not applicable

Max. pension level

 

 

 

 

 

 

Remuneration up to state pension assessment limit

 

48%

 

75%

 

Not applicable

Remuneration in excess of state pension assessment limit

 

48%

 

75%

 

Not applicable

Total pension model based on final salary

 

Yes

 

No

 

No

Net benefit limit incl. state pension

 

None

 

None

 

None

Gross benefit limit

 

75%

 

None

 

None

Adjustment of pensions

 

Section 16, (1,2) BetrAVG

 

Annual according to development of cost of living

 

Section 16, (1,2) BetrAVG, min. 8% every 3 years

Supplementary periods

 

None

 

None

 

Age of 55

Legal basis

 

Works agreement

 

Commitment to Management Board members in individual contracts

 

Commitment to executives in individual contracts

Number of eligible persons

 

164

 

6

 

29

The current pensions according to the classic pension benefit regulations of Bochumer Verband are adjusted in line with Section 20 of those regulations. Section 20 is a rule which is based on Section 16 (1.2) of the German Occupational Pensions Improvement Act (BetrAVG) but which, according to a ruling of the Federal Labour Court of Germany, is an independent rule. Other company pensions are reviewed and adjusted under the terms of the agreement according to Section 16 (1.2) BetrAVG. On every review date, the development of the cost of living since the individual retirement date is reviewed and compensated for. Only in the aforementioned deferred compensation model is the option, available since January 1, 1999, used to raise the current pensions every year by 1% (Section 16 (3) No. 1 BetrAVG). No further risks are seen.

The company has decided to use the internal financing effect of the provisions for pensions and only back a relatively small portion of the pension obligations with plan assets. Reinsurance policies have been taken out for former Management Board members against payment of a one-time insurance premium in order to provide additional protection against insolvency; these reinsurance policies were pledged to the eligible persons. They constitute plan assets, which are offset against the gross obligation. The of the reinsurance policies for individual persons is higher than the extent of the obligations towards the respective person. This surplus of the fair values of the assets over the obligation is shown under non-current other assets. The conclusion of further reinsurance policies is not planned.

Pension plan obligations and the expenses necessary to cover these obligations are determined using the projected unit credit method prescribed by IAS 19. Both pensions known on the reporting date and vested rights, as well as expected future increases in salaries and pensions, are included in the measurement. The following actuarial assumptions were made at the reporting date – in each case related to the end of the year and with economic effect for the following year.

Actuarial Assumptions

in %

 

Dec. 31, 2016

 

Dec. 31, 2015

 

 

 

 

 

Actuarial interest rate

 

1.70

 

2.15

Pension trend

 

1.75

 

1.75

Salary trend

 

2.75

 

2.75

The 2005 G mortality tables of Prof. Dr. Klaus Heubeck have been taken for the biometric assumptions without any changes.

The defined benefit obligation (DBO) developed as follows:

in € million

 

2016

 

2015

 

 

 

 

 

Defined benefit obligation as of Jan. 1

 

516.7

 

378.2

Additions due to business combinations

 

0.6

 

178.9

Disposal due to company sale

 

-0.1

 

Interest expense

 

10.8

 

9.4

Current service cost

 

8.6

 

6.2

Actuarial gains and losses:

 

 

 

 

Changes in the biometric assumptions

 

-1.7

 

1.3

Changes in the financial assumptions

 

34.5

 

-35.6

Transfer

 

0.3

 

0.9

Benefits paid

 

-25.7

 

-24.7

Past service cost

 

 

2.1

DBO as of Dec. 31

 

544.0

 

516.7

The present value of the defined benefit obligation is divided among the groups of eligible persons as follows:

in € million

 

Dec. 31, 2016

 

Dec. 31, 2015

 

 

 

 

 

Active employees

 

112.8

 

104.8

Former employees with vested pension rights

 

86.7

 

75.8

Pensioners

 

344.5

 

336.1

DBO as of Dec. 31

 

544.0

 

516.7

Plan assets comprise solely reinsurance contracts. The fair value of the plan assets has developed as follows:

in € million

 

2016

 

2015

 

 

 

 

 

Fair value of plan assets as of Jan. 1

 

22.5

 

18.0

Additions due to business combinations

 

0.1

 

4.6

Return calculated using the actuarial interest rate

 

0.5

 

0.4

Actuarial gains:

 

 

 

 

Changes in the financial assumptions

 

0.5

 

0.5

Benefits paid

 

-1.1

 

-1.0

Fair value of plan assets as of Dec. 31

 

22.5

 

22.5

The actual return on plan assets amounted to € 1.0 million during the fiscal year (2015: € 0.9 million).

The following table shows a reconciliation of the defined benefit obligation to the pension obligation recognized in the balance sheet:

in € million

 

Dec. 31, 2016

 

Dec. 31, 2015

*

largely attributable to the “Viterra Management Board commitment” and “GAGFAH Management Board commitment” pension plans

 

 

 

 

 

Present value of funded obligations*

 

35.2

 

31.0

Present value of unfunded obligations

 

508.8

 

485.7

Total present value of defined benefit obligations

 

544.0

 

516.7

 

 

 

 

 

Fair value of plan assets*

 

-22.5

 

-22.5

Net liability recognized in the balance sheet

 

521.5

 

494.2

 

 

 

 

 

Other assets to be recognized

 

1.1

 

1.0

Provisions for pensions recognized in the balance sheet

 

522.6

 

495.2

In 2016, actuarial gains of € 32.2 million (excluding deferred taxes) were recognized in other comprehensive income. Cumulative changes in equity not affecting net income of € 100.2 million (excluding deferred taxes) from actuarial losses on defined benefit obligations are recognized in other comprehensive income.

The weighted average term of the defined benefit obligations is 15.1 years.

The following table contains the projected, undiscounted pension payments of the coming five fiscal years and the total of those in the subsequent five fiscal years:

in € million

 

Projected pension payments

 

 

 

2017

 

25.5

2018

 

24.8

2019

 

24.4

2020

 

24.3

2021

 

24.0

2022–2026

 

117.0

Sensitivity Analyses

An increase or decrease in the material actuarial assumptions would have lead to the following DBO as of December 31, 2016, providing the other assumptions did not change:

in € million

 

 

 

DBO

 

 

 

 

 

Actuarial interest rate

 

Increase by 0.5%

 

506.1

 

 

Decrease by 0.5%

 

587.0

Pension trend

 

Increase by 0.25%

 

557.0

 

 

Decrease by 0.25%

 

531.2

An increase in life expectancy of 5.3% would have resulted in an increase in the DBO of € 23.5 million as of December 31, 2016. This percentage rise corresponds to a one-year increase in the life expectancy of a man who was 65 at the reporting date.

If several assumptions are changed simultaneously, the cumulative effect is not necessarily the same as if there had been a change in just one of the assumptions.

The provisions for pensions include € 7.0 million (Dec. 31, 2015: € 7.6 million) for pension obligations which were transferred to third parties as part of an assumption of debt and which relate to vested rights and the payment of current pensions. A corresponding non-current receivable is shown under miscellaneous other assets.

Development of Other Provisions

in € million

 

As of Jan. 1, 2016

 

Additions due to changes in scope of consolidation

 

Additions

 

Reversals

 

Interest accretion to provisions

 

Netting
plan
assets

 

Utilization

 

As of Dec. 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other provisions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Environmental remediation

 

24.9

 

 

 

-2.1

 

-0.1

 

 

-2.4

 

20.3

Personnel obligations

 

177.1

 

3.1

 

74.7

 

-19.2

 

0.3

 

1.1

 

-98.7

 

138.4

Outstanding trade invoices

 

83.1

 

0.2

 

49.3

 

-7.5

 

 

-1.4

 

-63.7

 

60.0

Miscellaneous other provisions

 

113.2

 

0.8

 

18.6

 

-22.9

 

0.6

 

 

-18.4

 

91.9

 

 

398.3

 

4.1

 

142.6

 

-51.7

 

0.8

 

-0.3

 

-183.2

 

310.6

Reversals of provisions are generally offset against the expense items for which they were originally established.

The provisions for environmental remediation primarily refer to site remediation of locations of the former Raab Karcher companies. Remediation has either already begun or an agreement has been reached with the authorities as to how the damage is to be remedied. The cost estimates are based on expert opinions detailing the anticipated duration of the remediation work and the anticipated cost.

The personnel obligations are provisions for planned departure from the company with multi-employer plans, provisions for pre-retirement part-time work arrangements, provisions for bonuses, severance payments not relating to restructuring and other personnel expenses. The other personnel expenses include a provision for the long-term incentive plan (LTIP) of € 14.8 million (Dec. 31, 2015: € 16.2 million) determined in accordance with IFRS 2 (see note [45] Related Party Transactions).

The miscellaneous other provisions include, among others, costs for legal disputes, sale-related costs and costs for entering transfers of titles.

Fair Value
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.