21 Defined benefit liabilities
Defined benefit plans
The group’s retirement plans include defined benefit pension plans in Switzerland, Belgium, Germany, Austria, India, Mexico, Ecuador, France, Italy, Turkey, Costa Rica and Indonesia. These plans are, except the plans in Switzerland, Belgium and Germany, unfunded and all determined by local regulations using independent actuarial valuations according to IAS 19. The group’s major defined benefit plan in Switzerland accounts for TCHF 14,900 or 68,7% (prior year: 10,958 or 64.5%) of the group’s net defined benefit liability.
Pension plans in Switzerland
The current pension arrangement for employees in Switzerland is made through a plan governed by the Swiss Federal Occupational Old Age, Survivors and Disability Pension Act (BVG). The plan of SoftwareONE’s Swiss company is administered by a separate legal foundation, which is funded by regular employer and employee contributions defined in the pension fund rules. The Swiss pension plan contains a cash balance benefit which is in essence contribution-based with certain minimum guarantees. Due to these minimum guarantees, the Swiss plan is treated as a defined benefit plan under IFRS. The plan is invested in a diversified range of assets in accordance with the investment strategy and the common criteria of an asset and liability management. A potential underfunding may be remedied by various measures such as increasing employer and employee contributions or reducing future benefits.
As at 31 December 2020, 229 employees (prior year: 203 employees) and one retiree (prior year: one retiree) are insured under the Swiss plan. The defined benefit obligation has a duration of 21 years (prior year: 22 years).
Amounts recognized in the balance sheet:
|
in CHF 1,000 |
Swiss plan |
Other plans |
2020 |
2019 |
|
|
|
|
|
|
|
Present value of funded obligations |
59,964 |
7,499 |
67,463 |
54,324 |
|
Fair value of plan assets |
–45,064 |
–5,613 |
–50,677 |
–41,321 |
|
Present value of unfunded obligations |
– |
4,917 |
4,917 |
3,996 |
|
|
|
|
|
|
|
Defined benefit liability in the balance sheet as at 31 December |
14,900 |
6,803 |
21,703 |
16,999 |
Reconciliation of the present value of the defined benefit obligation (DBO):
|
in CHF 1,000 |
Swiss plan |
Other plans |
2020 |
2019 |
|
|
|
|
|
|
|
At 1 January |
46,902 |
11,418 |
58,320 |
41,710 |
|
Business acquisitions |
– |
24 |
24 |
14,911 |
|
Service costs |
3,055 |
1,311 |
4,366 |
4,096 |
|
Employee contribution |
1,463 |
– |
1,463 |
1,260 |
|
Interest cost |
120 |
144 |
264 |
597 |
|
Actuarial losses/(gains) |
2,363 |
386 |
2,749 |
1,194 |
|
Benefits paid/transferred |
6,061 |
–893 |
5,168 |
–4,777 |
|
Currency translation adjustments |
– |
26 |
26 |
–671 |
|
|
|
|
|
|
|
As at 31 December |
59,964 |
12,416 |
72,380 |
58,320 |
Reconciliation of fair value of plan assets:
|
in CHF 1,000 |
Swiss plan |
Other plans |
2020 |
2019 |
|
|
|
|
|
|
|
At 1 January |
35,944 |
5,377 |
41,321 |
29,737 |
|
Business acquisitions |
– |
– |
– |
9,482 |
|
Interest income |
47 |
49 |
96 |
397 |
|
Return on plan assets (excluding interest income) |
–339 |
272 |
–67 |
1,777 |
|
Employer contributions |
1,889 |
428 |
2,317 |
2,163 |
|
Employee contributions |
1,463 |
– |
1,463 |
1,260 |
|
Benefits paid/transferred |
6,061 |
–545 |
5,516 |
–3,253 |
|
Currency translation adjustments |
– |
31 |
31 |
–242 |
|
|
|
|
|
|
|
As at 31 December |
45,065 |
5,612 |
50,677 |
41,321 |
Pension costs:
|
in CHF 1,000 |
Swiss plan |
Other plans |
2020 |
2019 |
|
|
|
|
|
|
|
Current service cost |
3,055 |
1,311 |
4,366 |
4,096 |
|
Interest cost on defined benefit obligation |
120 |
144 |
264 |
597 |
|
Interest on plan assets |
–47 |
–49 |
–96 |
–397 |
|
|
|
|
|
|
|
Total defined benefit cost recognized in income statement |
3,128 |
1,406 |
4,534 |
4,296 |
|
Thereof finance expense |
73 |
95 |
168 |
99 |
|
Thereof personnel expense |
3,055 |
1,311 |
4,366 |
4,197 |
|
|
|
|
|
|
|
Actuarial (gain)/loss arising from demographic assumptions |
– |
–199 |
–199 |
779 |
|
Actuarial (gain)/loss arising from changes in financial assumptions |
2,529 |
585 |
3,114 |
4,557 |
|
Actuarial (gain)/loss arising from experience |
–166 |
– |
–166 |
–4,142 |
|
Return on plan assets excluding interest income |
339 |
–272 |
67 |
–1,777 |
|
|
|
|
|
|
|
Total remeasurements cost recognized in OCI |
2,702 |
114 |
2,816 |
–583 |
|
|
|
|
|
|
|
Total defined benefit cost |
5,830 |
1,520 |
7,350 |
3,713 |
Split of plan assets in %:
|
|
Swiss plan |
Other plans |
2020 |
2019 |
|
|
|
|
|
|
|
Cash and cash equivalents |
1.4 % |
– |
1.0 % |
0.6 % |
|
Equity instruments |
31.2 % |
– |
22.9 % |
27.1 % |
|
Debt instruments |
44.4 % |
– |
32.7 % |
38.6 % |
|
Real estate |
18.6 % |
– |
13.7 % |
16.4 % |
|
Other |
4.4 % |
100.0 % |
29.7 % |
17.2 % |
|
|
|
|
|
|
|
Total |
100.0 % |
100.0 % |
100.0 % |
100.0 % |
The actual return on plan assets amounted to TCHF29 (prior year: TCHF 2,174).
Significant actuarial assumptions:
|
|
Swiss plan |
Other plans |
2020 |
2019 |
|
|
|
|
|
|
|
Discount rate |
0.2 % |
0.6 % |
0.3 % |
0.8 % |
|
Salary growth rate |
1.0 % |
1.6 % |
1.1 % |
1.3 % |
Pension liability – Sensitivity analysis for Swiss plans:
|
|
Change in assumption |
Change in DBO 2020 |
Change in DBO 2019 |
|
|
|
|
|
|
Discount rate |
+/– 0.25 % |
+/– 5.4 % |
+/– 5.2 % |
|
Salary growth rate |
+/– 0.25 % |
+/– 1.1 % |
+/– 1.2 % |
The above sensitivity analyses are based on a change in one assumption while holding all other assumptions constant. 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 balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.
Expected employer contributions to post-employment benefit plans for the period ended 31 December 2021 amounts to TCHF2,089 (prior year: TCHF 2,028).
The group also operates defined contribution plans for its employees under which the relevant contributions are expensed as they occur. The aggregate cost of these plans in 2020 amounted to TCHF 5,828 (prior year: TCHF 5,181).