29. Employee benefits

The non-current employee benefits comprise:

• other long-term employee benefits, including long-service awards;

• obligations resulting from occupational disability and supplements to social security payments;

• obligations relating to defined benefit plans.

Pension liabilities

The staff of the NS Group companies are covered by the pension plans of the following pension funds. The table also shows the numbers of active members.

In all cases where an employee is a member of an industry pension fund, the NS Group companies have no obligation to pay supplementary contributions in the event of a deficit in that industry pension fund, other than payment of future contributions. Equally, the NS Group companies have no claim to any surpluses in the funds. Consequently, these defined benefit pension plans are accounted for in these financial statements as defined contribution plans, in accordance with IFRS.

The total amount of the pension contributions charged to the income statement in 2019 was €141 million (2018: €139 million).

Railway Pensions Fund (defined contribution plan)

The pension plan for the railway industry is administered by the Railway Pensions Fund (Spoorwegpensioenfonds, SPF). The plan qualifies for recognition in the financial statements as a defined contribution plan. The contribution agreed with SPF is a fixed annual contribution agreed in advance and expressed as a percentage of the pensionable earnings. In 2019, NS paid the nominal pension contribution of 24% to the pension fund. Two-thirds of the pension contributions paid to SPF are paid by the company and one-third is paid by the employees. After payment of the agreed contribution, the company has no obligation to pay additional amounts should there be a deficit in the pension fund. The actuarial risks and investment risks are borne by the pension fund and its members. The pension costs up to 2035 are partly offset by the release of the lump-sum payment for wage increases (see note 28).

At the end of 2015, the Group made new agreements with the pension fund for dealing with the contribution build-up that came into effect on 1 January 2017. This led to a receivable from SPF of about €240 million that was received in two years (2016 and 2017). The employees’ part of the contribution build-up (one third of the amount) is recognised as a debt and will be settled with the employees over the next few years up to and including 2022. The employer’s part of the contribution build-up (two thirds of the amount) has been added to the lump-sum payment for wage increases and will be credited to the pension costs up to 2035.

There is a defined contribution plan for Abellio London & Surrey and the Servex supplementary pension plan.

Defined benefit plans

Abellio Greater Anglia, Abellio ScotRail, Abellio West Midlands and Abellio Transport Holdings have arranged for pensions for their staff to be administrated by the UK Railways Pension Scheme. The fund in question can be considered as a company pension fund and the pension plan as a defined benefit plan.

Every company is a designated employer for one or more cost-sharing agreements within the Railways Pension Scheme. Such cost-sharing agreements are geared to a lifelong pension. The amount of the pension depends on how long an employee was an active member of the pension plan and on their salary when leaving the plan (final salary plan).

Because of the nature of the cost-sharing agreements, the amounts payable to cover both the costs of the accrued pension entitlements and any shortfall between the value of the assets and the value of the pension liabilities are borne jointly by the employer and the contributing members in a ratio of 60% to 40% respectively. As a consequence, the employer recognises 60% of the total pension costs and pension liabilities in the balance sheet. The Railways Pension Scheme is administered by the Trustee, the Railways Pension Trustee Company Limited. The plans’ assets are invested via investment funds, each with a different risk and return profile.

Change in accounting policies relating to defined benefit pension plans in the United Kingdom

In the 2018 financial statements, the Group changed the way it accounts for defined benefit railway pension schemes in the United Kingdom. In the current franchise agreements, it has been agreed that the franchisee is only responsible for agreed contributions over the period of the franchise. When the franchise has ended, all rights and obligations with regard to the employees will be transferred to the new franchisee.

Therefore, only the portion of the surplus or deficit relating to the pension plan that is expected to be realised during the term of the franchise based on the assumptions and agreements on the balance sheet date is recognised in the Group balance sheet. As a result, on 31 December 2018 and 31 December 2017, no net surplus or deficit was recognised with regard to these railway pension schemes in the balance sheet. This approach is unchanged in comparison to previous years.

The Group has, however, changed the accounting policies for the pension costs in the income statement. From now on, only the costs that are expected to be borne by the franchisee (the Group) during the term of the franchise are recorded in the income statement. These net pension costs are therefore calculated while taking into account that part of the costs that will be borne by the employees (40%) and by other parties after the end of the current term of the franchise. This net calculation also takes into account any allocation within the term of the franchise that may possibly occur in connection with the triennial assessments during the term of the franchise, as well as any adjustments to the annual contributions over the term of the franchise.

Up to and including the 2017 financial year, the IAS 19 service costs were recognised in the income statement, taking into account only the part of the costs to be borne by the employees. The portion of the costs to be borne by other parties after the current term of the franchise ends was recognised as part of the ‘unrealised actuarial gains and losses’. The adjusted accounting policy for this railway pension plan provides a better insight into the share of the costs actually borne by the Group in the various franchises. This amendment also ties in with the corresponding change that a number of other franchisees in the United Kingdom have made in recent years.

The change in this accounting policy was also implemented in the measurement of the Group's interest in the joint venture Merseyrail Ltd.

The pension liabilities and the pension assets are based on actuarial calculations that were performed as at 31 December. At year-end 2019, the net liabilities of Abellio Transport Holdings Limited were €3 million (year-end 2018: €1 million). The average term for the pension liabilities is about 24 years.

To reflect the nature of the franchise, the shortfalls between the pension liabilities and the pension assets for Abellio Greater Anglia, Abellio ScotRail and Abellio West Midlands have been included in ‘Non-current liabilities’ to the extent that they concern the term of the franchise. The remaining amount at the end of the term of the franchise is not recognised in the balance sheet because it will constitute part of the debts of the next franchise holder. At year-end 2019, the net liabilities were nil (year-end 2018: nil). The average term for both pension liabilities is about 20 years. When determining the pension costs in the profit and loss account, account is also taken of the portion of the pension costs that are not borne by the current franchise holder, but will be borne by other parties after the current term of the franchise ends.

Basic assumptions for defined benefit plans

The following assumptions were used for determining the pension liabilities and the pension assets (based on a weighted average):

Mortality table: S1NA tables with CMI 2018 projections plus long-term expectation of +1.25%.

Breakdown

The breakdown of the pension liabilities is as follows.

Sensitivity analysis

Reasonably likely changes in one of the relevant actuarial assumptions on the balance-sheet date, while keeping all other assumptions constant, would have the following effect on the gross liability pursuant to the defined benefit entitlements.

A change in life expectancy of one year would lead to a change in the gross liability of about €95 million (31 December 2018: €61 million). The impact of these changes on the Group’s net liabilities during the term of the franchise is expected to be limited, given the transfer of liabilities at the end of the franchise.

Movement

The changes in the pension assets and liabilities are as follows.

Breakdown of pension assets

The breakdown of the pension assets is as follows.

Pension costs recognised in the income statement

Unrealised actuarial gains and losses

Based on current accounting policies, the Group expects to recognise pension costs for Abellio of €44 million for the above defined benefit plans in 2020.

Other long-term employee benefits

This includes long-service award obligations. The AG2018 mortality table is used for the calculation of the long-service award obligations.

The changes in the provision were as follows.

The current portion of this provision is €2 million.

The sensitivities are as follows.