NOTE 20
The Group operates several pension plans. In Finland, employees’ pension provision is partly arranged with pension insurance companies and partly with the Kesko Pension Fund. The Pension Fund’s department B manages the statutory pension insurance and department A manages supplementary coverage. Department A was closed on 9 May 1998. The pension plans managed by the Kesko Pension Fund are classified as defined benefit plans.
During the 2010 financial year, the management of the statutory pension provision and related insurance portfolio of some 3,100 Kesko Group employees were transferred from the Kesko Pension Fund to Ilmarinen Mutual Pension Insurance Company. The transfer was part of the plan to transfer the management of Kesko’s statutory pension provision and the related insurance portfolio in two phases from the Kesko Pension Fund to Ilmarinen announced on 30 December 2009. The second phase is expected to be carried out in 2012.
A total revenue of €8 million was recognised on the transfer of the pension insurance portfolio in 2010. The fair value of the Kesko Pension Fund’s investment assets has exceeded the amount of pension liabilities and their difference is shown within the assets in the consolidated statement of financial position. Relating to the transfer of the pension insurance portfolio, the Pension Fund returned pension assets to employer companies. The returned assets and interest contributed a €151.6 million cash inflow to the Kesko Group.
As regards foreign subsidiaries, the plan operated by the Norwegian subsidiary is classified as a defined benefit plan. At 31 December 2011, the net liability relating to the defined benefit plan in Norway was €0.4million (€0.3 million).
Pension plans in other foreign subsidiaries are arranged in accordance with local regulations and practices.
The defined benefit asset recognised in the balance sheet
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| € million | 2011 | 2010 |
| Present value of funded obligations | -292.4 | -285.8 |
| Fair value of plan assets | 502.7 | 528.7 |
| Deficit/surplus | 210.3 | 242.9 |
| Unrecognised actuarial gains (-)/losses (+) | -10.3 | -57.1 |
| Net assets (+)/liabilities (-) recognised in the balance sheet | 200.1 | 185.8 |
| The movement in the present value of the obligation is as follows: | ||
| Plan obligation at 1 Jan. | 285.8 | 525.1 |
| Current service cost | 7.2 | 10.5 |
| Interest cost | 14.8 | 23.1 |
| Benefits paid | -16.4 | -23.9 |
| Actuarial gains(-) / losses (+) | -5.4 | 3.8 |
| Transfer of insurance portfolio | -252.8 | |
| Others | 6.4 | |
| Plan obligation at 31 Dec. | 292.4 | 285.8 |
| The movement in the fair value of plan assets is as follows: | ||
| Plan assets at 1 Jan. | 528.7 | 871.6 |
| Expected return on plan assets | 32.7 | 53.4 |
| Contributions to plan | -0.9 | -38.0 |
| Benefits paid | -16.4 | -23.9 |
| Actuarial gains(+) / losses (-) | -53.2 | 58.6 |
| Transfer of insurance portfolio | -269.5 | |
| Pension assets returned | -123.5 | |
| Others | 11.8 | |
| Plan assets at 31 Dec. | 502.7 | 528.7 |
| The amounts recognised in the income statement are as follows: | ||
| Current service cost | -7.2 | -10.5 |
| Interest cost | -14.8 | -23.1 |
| Expected return on plan assets | 32.7 | 53.4 |
| Others | 3.8 | 4.0 |
| Impact of insurance portfolio transfer | 8.3 | |
| Total recognised in the income statement | 14.5 | 32.0 |
| The change in net assets recognised in the balance sheet is as follows: | ||
| At 1 January | 185.8 | 315.2 |
| Income/cost recognised in the income statement | 14.5 | 32.0 |
| Contributions to plan | -0.9 | -38.0 |
| Pension assets returned | -123.5 | |
| Others | 0.7 | |
| At 31 December | 200.1 | 185.8 |
| Pensions managed by the Kesko Pension Fund | 2011 | 2010 | 2009 | 2008 | 2007 |
| Present value of plan obligation | -292.4 | -285.8 | -525.1 | -530.4 | -560.6 |
| Fair value of plan assets | 502.7 | 528.7 | 871.6 | 819.5 | 897.0 |
| Surplus/deficit | 210.3 | 242.9 | 346.5 | 289.1 | 336.4 |
| Experience adjustments on plan assets | -83.6 | 58.5 | 18.2 | -130.9 | 11.5 |
| xperience adjustments on plan liabilities | -5.4 | -2.7 | 4.3 | -15.6 | 23.2 |
The actual return on plan assets was €-20.6 million (€112.0 million).
In 2012, the Group expects to pay €0.0 million in contributions to defined benefit plans.
| Classes of plan assets, % of fair values of plan assets | 2011 | 2010 |
| Real estate | 39.0% | 45.2% |
| Shares | 31.2% | 31.8% |
| Long-term interest investments | 6.1% | 5.6% |
| Short-term interest investments | 20.6% | 14.8% |
| Other investments | 3.1% | 2.6% |
| Total | 100.0% | 100.0% |
| Plan assets, € million | ||
| Kesko Corporation shares included in fair value | 32.5 | 45.3 |
| Real estate leased by the Kesko Group included in fair value | 210.6 | 209.2 |
| Principal actuarial assumptions: | 2011 | 2010 |
| Discount rate | 5.00–5.25% | 5.00–5.25% |
| Expected return on plan assets | 6.30% | 6.30% |
| Expected salary increases | 3.50% | 3.50% |
| Inflation | 2.00% | 2.00% |
| Expected average remaining service life | 14–26 | 14–26 |
When calculating the pension obligation of the Kesko Pension Fund’s department B, the supplementary coefficient has been 1.5% for years 2012–2013, 2.1% for years 2014–2016, and 2.7% for subsequent years.
When calculating the Pension Fund’s expected return, investment assets have been divided into five classes. The 6.3% total expected return on the investment portfolio is composed of the compound returns on these asset classes. The returns expected on different asset classes are based on the parameters of an investment portfolio analysis model widely used in employee pension plans, and calculated based on long-term historical data. The most significant class of assets affecting the total returns is shares.