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Notes to the Group’s Financial Statements

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31 Employee benefits
Employee benefits
Sampo has defined benefit plans in P&C insurance business in Sweden and Norway.
In addition to statutory retirement pension insurance, the Group has certain voluntary defined benefit plans. The voluntary defined benefit plans are intra-Group and included in the insurance liabilities of Mandatum Life. The amount is negligible and they have no material impact on the Group profit or loss or equity.
Employee benefit obligations of P&C Insurance 31 Dec.
EURm 2015 2014
Present value of estimated pension obligation, including social costs 303 664
Fair value of plan assets 213 399
Net pension obligation recognised in the balance sheet 90 265
Since January 1, 2008, the main Swedish pension plan has been closed to new employees born in 1972 or later and the corresponding Norwegian pension plan has been closed to new employees since January 1, 2006 regardless of age. In May 2015, If decided that all employees born in 1958 or later that are covered by the Norwegian defined-benefit pension plan would be switched to a defined-contribution plan as of January 1, 2016. As of the same date, it was also decided that existing retirees would no longer be covered by the plan, and that future retirees would cease being covered by the plan when they are no longer employed by If. Accordingly, as of year-end 2015, the Norwegian pension plan consists solely of active people employed prior to 2006 and born no later than 1957.
The pension benefits referred to are old-age pension and survivors’ pension in Sweden and old-age pension, survivors’ pension and disability pension in Norway. A common feature of all of the pension plans is that the employees and survivors encompassed by the plans are entitled to a guaranteed pension that depends on the employees’ service period and pensionable salary at the time of retirement. The dominating benefit is the old-age pension, which refers in part to temporary pension before the anticipated retirement age and in part to a life-long pension after the anticipated retirement age.
The retirement age for receiving premature pension is normally 62 years in Sweden and normally 65 years in Norway. In Sweden, premature old-age pension following a complete service period is payable at a rate of approximately 65% percent of the pensionable salary and applies to all employees born in 1955 or earlier and who were covered by the insurance sector’s collective bargaining agreement of 2006. In Norway, premature old-age pension following a complete service period is payable at a rate of approximately 70% percent of the pensionable salary and applies to all employees born in 1957 or earlier and who were employed by If in 2013.
The anticipated retirement age in connection with life-long pension is 65 years for Sweden and 67 years for Norway. In Sweden, life-long old-age pension following a complete service period is payable at a rate of approximately 10% of the pensionable salary between 0 and 7.5 income base amounts, 65% of salary between 7.5 and 20 income base amounts and 32.5% between 20 and 30 income base amounts. In Norway, life-long old-age pension following a complete service period is payable at a rate of approximately 70% of the pensionable salary up to 12 National Insurance base amounts, together with the estimated statutory old-age pension. Paid-up policies and pension payments from the Swedish plans are normally indexed upwards in an amount corresponding to the change in the consumer price index. However, there is no agreement guaranteeing the value and future supplements in addition to the contractual pension benefit could either rise of fall. Pension payments from the Norwegian plans are were earlier indexed upwards in an amount corresponding to 80 - 100% of the change in the consumer price index. Instead, as of January 1, 2016, a paid-up policy is issued on retirement, whereby If is no longer responsible for and has no obligation in respect of future indexation of the insured plans.
The pensions are primarily funded through insurance whereby the insurers establish the premiums and disburse the benefits. If’s obligation is primarily fulfilled through payment of the premiums. Should the assets that are attributable to the pension benefits not be sufficient to enable the insurers to cover the guaranteed pension benefits, If could be forced to pay supplementary insurance premiums or secure the pension obligations in some other way. In addition to insured pension plans, there are also unfunded pension benefits in Norway for which If is responsible for ongoing payment.
To cover the insured pension benefits, the related capital is managed as part of the insurers’ management portfolios. In such management, the characteristics of the investment assets are analyzed in relation to the characteristics of the obligations, in a process known as Asset Liability Management. New and existing asset categories are evaluated continuously in order to diversify the asset portfolios with a view to optimizing the anticipated risk-adjusted return. Any surplus that arises from management of the assets normally accrues to If and/or the insured and there is no form of transfer of the asset value to other members of the insurance collective.
The insurers and If are jointly responsible for monitoring the pension plans, including investment decisions and contributions. The pension plans are essentially exposed to similar material risks regarding the final amount of the benefits, the investment risk associated with the plan assets and the fact that the choice of discount interest rate affects their valuation in the financial statements.
When applying IAS 19, the pension obligations are calculated, as is the pension cost attributable to the fiscal period, using actuarial methods. Pension rights are considered to have been vested straight line during the service period. The calculation of pension obligations is based on future anticipated pension payments and includes assumptions regarding mortality, employee turnover and salary growth. The nominally calculated debt is discounted to the present value using an interest rate based on current market interest rates adjusted to take into account the duration of the company’s pension obligations. As a basis for determining the discount interest rate for the Swedish obligation, If uses liquid covered mortgage bonds issued by a mortgage institution. Covered mortgage bonds are also used for the Norwegian obligation. After a deduction for the plan assets, a net asset or net liability is recognised in the balance sheet.
The following tables contain a number of material assumptions, specifications of pension costs, assets and liabilities and a sensitivity analysis showing the potential effect on the obligations of reasonable changes in those assumptions as at the end of the fiscal year. As apparent from the tables, the said amendments to the insured plan in Norway have been taken into account when preparing the annual accounts for 2015 and had a material impact on both recognized costs and assets and obligations.
The carrying amounts have been stated including special payroll tax in Sweden (24.26%) and a corresponding fee in Norway (14.1%).
Specification of employee benefit obligations by country
2015 2014
Sweden Norway Total Sweden Norway Total
Recognised in income statement and other comprehensive income
Current service cost 6 9 15 -5 -11 -16
Past service cost 0 -156 -156 -1 - -1
Interest expense on net pension liability 1 3 4 -1 -6 -7
Total in income statement 7 -144 -137 -7 -17 -24
Remeasurement of the net pension liability -9 -4 -14 -34 -71 -105
Total in comprehensive income statement -2 -148 -150 -40 -88 -129
Recognised in balance sheet
Present value of estimated pension liability, including social costs 196 107 303 194 470 664
Fair value of plan assets 156 57 213 140 259 399
Net liability recognised in balance sheet 40 49 90 55 211 265
2015 2014
Distribution by asset class Sweden Norway Sweden Norway
Debt instruments, level 1 39% 50% 40% 52%
Debt instruments, level 2 1% 13% 1% 13%
Equity instruments, level 1 26% 5% 28% 9%
Equity instruments, level 3 10% 3% 8% 3%
Property, level 3 10% 12% 10% 9%
Other, level 1 4% 14% 3% 10%
Other, level 2 6% 3% 6% 4%
Other, level 3 4% 0 % 4% 0 %
The following actuarial assumptions have been used for the calculation of defined benefit pension plans in Norway and Sweden:
Sweden Sweden Norway Norway
31.12.2015 31.12.2014 31.12.2015 31.12.2014
Discount rate 3.00% 2.75% 2.50% 2.75%
Future salary increases 2.75% 2.75% 3.00% 3.50%
Price inflation 1.75% 1.75% 2.00% 2.00%
Mortality table FFFS 2007:31 +1 year FFFS 2007:31 +1 year K2013 K2013
Average duration of pension liabilities 21 years 22 years 14 years 17 years
Expected contributions to the defined benefit plans during 2015 and 2016 10 8 4 15
2015 2014
Sensitivity analysis of effect of reasonably possible changes Sweden Norway Total Sweden Norway Total
Discount rate, +0,50% -23 -7 -30 -23 -40 -63
Discount rate, -0,50% 27 8 35 27 45 71
Future salary increases, +0,25% 8 1 9 8 8 16
Future salary increases, -0,25% -7 -1 -9 -7 -8 -15
Expected longevity, +1 year 7 2 10 7 15 22
2015 2014
EURm Funded plans Unfunded plans Total Funded plans Unfunded plans Total
Analysis of the employee benefit obligation
Present value of estimated pension liability, including social costs 267 36 303 620 44 664
Fair value of plan assets 213 - 213 399 - 399
Net pension liability recognised in the balance sheet 54 36 90 222 44 265
Analysis of the change in net liability recognised in the balance sheet
EURm 2015 2014
Pension liabilities:
At the beginning of the year 664 580
Earned during the financial year 15 16
Costs pertaining to prior-year service -156 1
Interest cost 15 23
Actuarial gains (-)/losses (+) on financial assumptions 4 123
Actuarial gains (-)/losses (+), experience adjustments -14 -3
Exchange differences on foreign plans -7 -48
Benefits paid -25 -27
Settlements -194 -
Defined benefit plans at 31 Dec. 303 664
Reconciliation of plan assets:
At the beginning of the year 399 385
Interest income 11 15
Difference between actual return and calculated interest income 4 15
Contributions paid 26 29
Exchange differences on foreign plans -10 -29
Benefits paid -16 -17
Settlements -200 -
Plan assets at 31 Dec. 213 399
Other short-term employee benefits
There are other short-term staff incentive programmes in the Group, the terms of which vary according to country, business area or company. Benefits are recognised in the profit or loss for the year they arise from. An estimated amount of these short-term incentives, social security costs included, for 2015 is EURm 72.