Note 22 - Pension

Defined benefit scheme

This pension scheme is administered by a pension fund conferring entitlement to specific future pension benefits from age 67. The schemes include children’s pension and disability pension under further rules. The Group’s defined benefit pension scheme assures the majority of employees a pension of 68 percent of final salary up to 12G. The defined benefit scheme is closed to new members. It was decided to terminate the defined benefit scheme at a board meeting on 21 October 2016. Employees on this scheme will transfer to the defined contribution scheme as from 1 January 2017, and will receive a paid-up policy showing rights accumulated under the defined benefit scheme. The termination resulted in reduced pension obligations, which has been treated  as a settlement gain and reduced the pension expense for 2016.

Paid-up policies are managed by the pension fund, which becomes a paid-up pension fund as from 1 January 2017. A framework agreement has been established between SpareBank 1 SMN and the pension fund which covers funding, asset management etc. In view of the responsibility still held by SpareBank 1 SMN, future liabilities will need to be incorporated in the accounts.  At yearend 2021 the scheme is  overfunded by NOK 54 million.

The board of the pension fund is required to be composed of representatives from the Group and participants in the pension schemes in accordance with the articles of association of the pension fund.

In addition to the pension obligations coveredd by the pension fund, the group has unfunded pension liabilities which can not be funded by the assets in the collective arrangements. The obligations entails employees not registered as member of the pension fund, additional  pensions above 12 G, early retirement pension schemes and contractual early retirement schemes in new arrangement (AFP Subsidies Act).

For further details of the Group’s pension schemes see Note 2 on accounting principles and Note 20 on personnel expenses.

  2021 2020
Actuarial assumptions Costs Commitment Costs Commitment
Discount rate 1.5 % 1.5 % 2.3 % 1.5 %
Expected rate of return on plan assets 1.5 % 1.5 % 2.3 % 1.5 %
Expected future wage and salary growth 2.00 % 2.25 % 2.00 % 2.00 %
Expected adjustment of basic amount (G) 2.00 % 2.25 % 2.00 % 2.00 %
Expected increase in current pension 0%/2.0% 0%/2.0% 0%/2.0% 0%/2.0%
Employers contribution 19.1 % 19.1 % 19.1 % 19.1 %
Expected voluntary exit before/after 50 yrs 2/0 % 2/0 % 2/0 % 2/0 %
Estimated early retirement outtake at age 62/64 25/50 % 25/50 % 25/50 % 25/50 %
         
Mortality base table K2013BE      
Disability IR73      
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Parent Bank    Group 
2020 2021 Net pension liability in the balance sheet (NOK million). Financial position 1 Jan. 2021 2020
608 640 Net present value of pension liabilities in funded schemes 640 608
-743 -743 Estimated value of pension assets -743 -743
-135 -104 Net pension liability in funded schemes -104 -135
3 2 Employer’s contribution 2 3
-132 -102 Net pension liability in the balance sheet -102 -132
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Distribution of liability between unfunded and funded pension scheme, Group 1.1
 
Group 2021   2020
  Funded Unfunded Total   Funded Unfunded Total
Present value of pension liability in funded schemes 631 8 640   595 13 608
Fair value of pension assets -743 - -743   -743 - -743
Opening balance adjustment - - -   - - -
               
Net pension liability in the balance sheet before employer's contribution -112 8 -104   -148 13 -135
Employer’s contribution - 2 2   - 3 3
Net pension liability in the balance sheet after employer's contribution -112 10 -102   -148 16 -132
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2020 2021 Pension cost for the year 2021 2020
0 0 Present value of pension accumulated in the year 0 0
-3 -2 Interest cost of pension liabilities  -2 -3
         
-3 -1 Net defined-benefit pension cost without employer's contribution -1 -3
0 0 Employer's contribution - subject to accrual accounting 0 0
-3 -1 Net pension cost related to defined benefit plans * -1 -3
8 8 Early retirement pension scheme, new arrangement  14 12
51 54 Cost of defined contribution pension 102 96
56 60 Total pension cost  115 105
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Other comprehensive income for the period 2021 2020
  Unfunded Funded Total Unfunded Funded Total
Change in discount rate -0 -9 -9 1 74 75
Change in other economic assumptions - - - - - -
Change in mortality table - - - - - -
Change in other demographic assumptions - - - - - -
Changing other factors, DBO -2 33 32 -7 -18 -25
Change in other factors, pension assets - 27 27 - -16 -16
Other comprehensive income for the period -2 51 49 -6 40 34
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2020 2021 Movement in net pension liability in the balance sheet 2021 2020
-132 -96 Net pension liability in the balance sheet 1.1 -96 -132
34 49 Actuarial gains and losses for the year 49 34
-3 -1 Net defined-benefit costs in profit and loss account incl. Curtailment/settlement -1 -3
-1 -1 Paid-in pension premium, defined-benefit schemes -1 -1
-102 -49 Net pension liability in the balance sheet 31.12 -49 -102
         
         
2020 2021 Financial status 31.12 2021 2020
640 645 Pension liability  645 640
-743 -701 Value of pension assets -701 -743
-104 -56 Net pension liability before employer's contribution -56 -104
2 1 Employer's contribution 1 2
-102 -54 Net pension liability after employer's contribution* -54 -102
* Presented gross in the Group accounts
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Distribution of financial status between unfunded and funded pension scheme, Group 
 
Group 2021   2020
  Funded Unfunded Total   Funded Unfunded Total
Pension liability 639 7 645   631 8 640
Value of pension assets -701 - -701   -743 - -743
Net pension liability before employer's contribution -62 7 -56   -112 8 -104
Employer's contribution - 1 1   - 2 2
Net pension liability after employer's contribution -62 8 -54   -112 10 -102
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Fair value of pension liability, Group 2021 2020
OB pension liability (PBO)  640 608
Present value of pension accumulated in the year 0 0
Payout/release from scheme  -27 -27
Interes costs of pension liability 9 14
Curtailment/ Settlement  - -
Actuarial gain or loss 23 45
CB pension liability (PBO) 645 640
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Fair value of pension assets, Group 2021 2020
OB pension assets 743 743
Paid in 1 1
Payout/release from fund -27 -27
Expected retur 11 17
Curtailment/ Settlement  - -
Actuarial changes -27 10
CB market value of pension assets 701 743
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  Discount rate Salary adjustment Pension adjustment
Sensitivity, Group  + 1 pp   - 1 pp   +1 pp   - 1 pp   + 1 pp
2021          
Change in accumulated pension rights in course of year - - - - -
Change in pension liability -89 110 0 0 111
           
2020          
Change in accumulated pension rights in course of year - - - - -
Change in pension liability -93 117 1 -1 116
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2020 2021 Members 2021 2020
740 728 Numbers of persons included in pension scheme 728 740
233 220 of which active 220 233
507 508 of which retirees and disabled 508 507
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Investment and pension assets in the pension fund 2021 2020
Current bonds 38 % 40 %
Bonds held to maturity 5 % 5 %
Money market 21 % 18 %
Equities 29 % 28 %
Real estate 7 % 7 %
Other 0 % 1 %
Total 100 % 100 %
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The pension scheme arrangement is located in its own pension fund, which has a long-term horizon on the management of its capital. The pension fund seeks to achieve as high a rate of return as possible by composing an investment portfolio that provides the maximum risk-adjusted return. The pension fund seeks to spread its investments on various issuers and asset classes in order to reduce company-specific and market-specific risk. The portfolio thus comprises equity investments in Norwegian and foreign shares. The bond portfolio is essentially invested in Norwegian bonds. Bank deposits are placed in Norwegian Banks.

 

Annual report and notes

© SpareBank 1 SMN