20 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, excluding those in Switzerland, Belgium, and Germany, are 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 81.6% (prior year: 83.4%) of the group’s present value of funded and unfunded obligations.

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 of 31 December 2022, 346 employees (prior year: 252 employees) and no retiree (prior year: no retiree) are insured under the Swiss plan. The defined benefit obligation has a duration of 15 years (prior year: 19 years).

Based on the independent actuarial valuation for the Swiss plan as of 31 December 2022, the present value of funded obligations decreased by TCHF 15,945 due to an increase in discount rate from 0.3% to 2.0%.

Amounts recognised in the balance sheet:

in CHF 1,000	Swiss plan	Other plans	2022	2021

Present value of funded obligations	52,316	6,463	58,779	76,826
Fair value of plan assets	–52,074	–5,368	–57,442	–68,535
Present value of unfunded obligations	–	5,343	5,343	5,070

Total defined benefit liabilities	242	6,438	6,680	13,361

Reconciliation of the present value of the defined benefit obligation (DBO):

in CHF 1,000	Swiss plan	Other plans	2022	2021

On 1 January	68,261	13,635	81,896	72,380
Business acquisitions	–	–	–	1,668
Service costs	4,110	1,367	5,477	5,803
Employee contribution	2,251	–	2,251	3,093
Interest cost	210	264	474	266
Actuarial losses/(gains)	–15,089	–1,992	–17,081	–3,187
Benefits paid/transferred	–6,917	–771	–7,688	2,449
Other	–510	–	–510	–
Currency translation adjustments	–	–697	–697	–576

As of 31 December	52,316	11,806	64,122	81,896

Reconciliation of fair value of plan assets:

in CHF 1,000	Swiss plan	Other plans	2022	2021

On 1 January	61,733	6,802	68,535	50,677
Business acquisitions	–	–	–	1,188
Interest income	195	140	335	178
Return on plan assets (excluding interest income)	–6,550	–1,670	–8,220	8,196
Employer contributions	2,251	512	2,763	2,515
Employee contributions	2,251	–	2,251	3,093
Benefits paid/transferred	–6,917	–94	–7,011	3,003
Other	–889	–	–889	–
Currency translation adjustments	–	–322	–322	–315

As of 31 December	52,074	5,368	57,442	68,535

Pension costs:

in CHF 1,000	Swiss plan	Other plans	2022	2021

Current service cost	4,110	1,367	5,477	5,645
Interest cost on defined benefit obligation	210	264	474	266
Interest on plan assets	–195	–140	–335	–178

Total defined benefit cost recognised in income statement	4,125	1,491	5,616	5,733
Thereof finance expense	15	124	139	88
Thereof personnel expense	4,110	1,367	5,477	5,645

Actuarial (gain)/loss arising from demographic assumptions	–	–136	–136	–1,985
Actuarial (gain)/loss arising from changes in financial assumptions	–11,955	–2,020	–13,975	–1,725
Actuarial (gain)/loss arising from experience	–3,134	164	–2,970	523
Return on plan assets excluding interest income	6,550	1,670	8,220	–8,196

Total remeasurements cost recognised in OCI	–8,539	–322	–8,861	–11,383

Total defined benefit cost	–4,414	1,169	–3,245	–5,650

Split of plan assets in %:

	Swiss plan	Other plans	2022	2021

Cash and cash equivalents	1.8 %	–	1.6 %	0.5 %
Equity instruments	36.3 %	–	32.9 %	29.8 %
Debt instruments	39.7 %	–	36.0 %	36.6 %
Real estate	20.1 %	–	18.2 %	16.8 %
Other	2.1 %	100.0 %	11.3 %	16.3 %

Total	100.0 %	100.0 %	100.0 %	100.0 %

The actual return on plan assets amounted to TCHF –7,885 (prior year: TCHF 8,374).

Significant actuarial assumptions:

	Swiss plan	Other plans	2022	2021

Discount rate	2.0 %	3.3 %	2.2 %	0.6 %
Salary growth rate	1.0 %	3.8 %	1.5 %	1.2 %

Pension liability – Sensitivity analysis for Swiss plans:

	Change in assumption	Change in DBO 2022	Change in DBO 2021

Discount rate	+/– 0.25bps	–/+ 4.2 %	–/+ 4.9 %
Salary growth rate	+/– 0.25bps	+/– 0.7 %	+/– 0.9 %

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 recognised within the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Expected employer contributions to post-employment benefit plans for the period ended 31 December 2022 amounted to TCHF 2,177 (prior year: TCHF 2,560).

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 2022 amounted to TCHF 9,529 (prior year: TCHF 8,409).