3.5 Provisions for pension liabilities

Accounting policies

The net defined benefit liability/asset for all pension and other post-employment plans that qualify as defined benefit plans is determined by calculating the present value of the defined benefit obligation and deducting the fair value of the plan assets. The resulting deficit or surplus is adjusted for any effect of limiting a net defined benefit asset to the asset ceiling and for any effect of minimum funding requirements.

PostNL uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. Assumptions are made about financial variables (such as the discount rate and the rate of benefit increases) and demographic variables (such as employee turnover and mortality). The discount rate is determined by reference to market rates using high-quality corporate bonds. The assumed return on plan assets equals the discount rate applied in the calculation of the pension obligations at the beginning of the year.

Service costs are recognised as operating expenses in the income statement. Gains or losses on the amendment or curtailment of a defined benefit plan (past service cost) and gains or losses on a settlement are recognised as operating expenses in the income statement on the date of the amendment, curtailment or settlement.

The net interest expense/income on the net defined benefit liability/asset, asset ceiling and/or minimum funding requirements, is recognised as ‘Interest and similar expenses/ income’ in the income statement (below operating income).

Deviations between the expected and actual development of the pension obligation and plan assets, resulting in actuarial gains and losses, are recognised immediately within Other Comprehensive Income (net of tax). The impact of the asset ceiling and/or minimum funding requirements is also recognised within Other Comprehensive Income (net of tax).

Pension costs for (collective) defined contribution plans are expensed in the income statement when incurred or due.

PostNL’s main Dutch pension plan (main plan) covers the employees subject to PostNL’s collective labour agreement and staff with a personal labour agreement in the Netherlands. The main plan is externally funded in ‘Stichting Pensioenfonds PostNL’ (main fund), an independent legal entity which is not owned or controlled by any other legal entity and which falls under the regulatory supervision of De Nederlandsche Bank.

Main developments with impact on 2022 and 2023

Based on a joint decision by PostNL, the pension fund and the trade unions, taken on 23 December 2022, the main plan has been amended as per 31 December 2022. The pension plan is since based on a collective defined contribution plan. This means that PostNL is only required to pay the regular pension contribution. If the financial position of the pension fund would deteriorate, PostNL is not obliged to do top-up payments. At the same time, PostNL is also not entitled to restitutions, should the financial position of the pension fund allow for that. Until the amendment, the main plan was a defined benefit average pay pension plan. As part of the agreement made at 23 December 2022, the previously applicable unconditional funding obligation has also been adjusted. The adjustment concerned a reduction of €20 million.

Change in pension accounting classification

The accounting consequence of the amended pension plan was a change from defined benefit accounting to defined contribution accounting per 31 December 2022. The settlement result as recorded in the statement of profit or loss comprised the release of the positive funded status and the reduction of the unconditional funding obligation. As a separate sequential step, the recorded asset ceiling adjustment was reversed within other comprehensive income.

The financial impact of the change in pension accounting classification was material, being a loss of €1,357 million in 2022 (net loss: €1,007 million) recorded in the statement of profit or loss, comprising a defined benefit pension expense of €1,354 million and an addition to other provisions of €3 million, and a net defined benefit pension income of €1,020 million in 2022 recorded in other comprehensive income.

Following the change towards a collective defined contribution plan, according to IFRS, pension expenses equal the contribution paid by PostNL to the pension fund as of 31 December 2022. In 2022 regular pension expenses were substantially higher than the paid contributions. Following the adjustment of the pension plan, this gap disappears as of 2023. As a consequence, pension expenses in 2023 are substantially lower than in 2022.

Further details of the main plan

As of 31 December 2022, the main plan is a collective defined contribution plan with a basis accrual rate of 1.875% of the pensionable base and retirement age set at 68 years. The pensionable base is derived as the pensionable salary, with a statutory maximum of €128,810 (level 2023), minus a state pension offset.

Pension (cash) contributions are bounded by a minimum level of 21.7% and a maximum level of 29.2% of the pensionable salary base. In respect of the collective defined contribution plan, until the transition to the anticipated new pension contract, the ex-ante contribution level equals the maximum level of 29.2% for the years 2023-2028.

Statement of changes in provision for defined benefit plans

The following table presents an overview of the movement of the provision for post-employment benefit plans. At 31 December 2022, the remaining provision for defined benefit plans only relate to non-material pension plans in various countries within Europe. The movements in 2023 fully relate to these other plans only.

PostNL Statement of changes in provision for defined benefit plans in million
2022, 2023

Dutch main pension planOther plansTotal 20222023
Balance at 1 January(64)(3)(67)(2)
Post-employment benefit income/(expenses)(162)(0)(162)(0)
Employer contributions850850
Instalment unconditional funding obligation28 28
Actuarial gains/(losses)66316630
Pension asset ceiling/minimum funding requirement(586) (586)
Balance at 31 December before settlement(36)(2)(38)(2)
Pension settlement costs within statement of profit or loss(1,354) (1,354)
Pension settlement gain within OCI1,374 1,374
Transfer to current pension payable16 16
Balance at 31 December0(2)(2)(2)
Other provisions settlement costs within statement of profit or loss(3) (3)

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The actuarial gains/(losses) in 2022 mainly related to the positive impact of the change in discount rate partly offset by the negative impact of the change in the assumed benefit increases and the lower than assumed actual return on plan assets.

The following table gives a break-down of total pension costs and total pension cash contributions.

PostNL Details on pension costs and cash contributions in million
2022, 2023

Regular defined benefit costs (162)(0)
Pension settlement costs within statement of profit or loss (1,354)
Defined contribution costs (12)(92)
Total employer pension costs (1,528)(92)
Of which included within salaries, pensions and social security contributionsrefer to note 2.3.2(1,526)(92)
Of which included within interest and similar expensesrefer to note 2.4.1(2)(0)
Defined benefit cash contributions 850
Defined benefit instalment unconditional funding obligation 28
Defined contribution cash contributions 1292
Total employer pension cash contributions 12592

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For 2024, we expect total employer cash contributions of around €98 million (2023: €92 million).

For 2024, we expect total employer pension costs within operating income of around €98 million (2023: €92 million).

Detailed reconciliation of the opening and closing balances

The following table reconciles the opening and closing balances of the present value of the defined benefit obligation and the fair value of plan assets, the funded status and the netted pension provisions, and the employer pension expenses of PostNL's defined benefit post-employment plans.

PostNL Detailed overview of changes in consolidated defined benefit plans in million
2022, 2023

Change in benefit obligation
Benefit obligation at beginning of year(10,133)(6)
Service costs(174)(0)
Interest costs(104)(0)
Actuarial (losses)/gains2,646(0)
Benefits paid2611
Settlement benefit obligation7,498
Benefit obligation at end of year(6)(6)
Of which funded benefit obligations(5)(5)
Of which unfunded benefit obligations(2)(1)
Change in plan assets
Fair value of plan assets at beginning of year10,8824
Assumed return on plan assets1110
Employee contributions22
Employer contributions850
Instalment unconditional funding obligation28
Other costs(8)
Actuarial (losses)/gains(1,983)0
Benefits paid(261)(1)
Settlement plan assets(8,873)
Fair value of plan assets at end of year44
Change in funded status
Funded status at the beginning of year749(2)
Operating expenses(160)(0)
Interest (expenses)/income7
Employer contributions1130
Actuarial (losses)/gains6630
Settlement of benefit obligation and plan assets(1,374)
Funded status at end of year(2)(2)
Components of employer pension expenses
Service costs (net of employee contributions)(152)(0)
Interest (expenses)/income(2)
Other costs(8)
Pension settlement costs within statement of profit or loss(1,354)
Total post-employment benefit income/(expenses)(1,516)(0)
Weighted average assumptions as at 31 December
Discount rate3.4%
Rate of benefit increases1.7%
Life expectancy 65 year old men/women (in years)21.4 / 23.7

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Key assumptions 2022

The discount rate is based on the long-term yield on high quality (AA-rated) corporate bonds, taking into account the duration of the projected pension liabilities of around 16 years. The corporate bond yield information is sourced from iBoxx, taking into account a minimum outstanding amount and other defined selection criteria. By applying curve-fitting procedures, a yield curve is generated. Using the full yield curve, the discounted value of the expected future benefit payments is matched with the comparable present value when using a single discount rate.

The conditional benefit increases are based on the (derived) Consumer Price Index. The assumed rate of benefit increases is based on advice, published statistics, the pension plan's ambition level and the actual financial status of the pension fund.

Assumptions regarding the longevity outlook are based on advice, published statistics and experience per country. The applied prospective longevity rates are derived from the Dutch mortality table 'AG prognosetafel 2022' taking into account experience rates based on postal areas, as applied by the main fund.