(25) Provisions for pensions and similar obligations
Pension plans
Jungheinrich Group company pension schemes are either defined contribution or defined benefit plans. In defined contribution plans, Jungheinrich does not assume any obligation in addition to the contributions made to state-owned or private pension insurers. Ongoing contributions are recorded as a pension cost of the corresponding year.
Provisions for pensions mainly include the commitments entered into in Germany and regulated in individual and collective agreements regarding defined benefit plans for members of the Board of Management, managing directors, and employees of Jungheinrich Aktiengesellschaft and its German subsidiaries as well as Jungheinrich Moosburg GmbH. When pension benefits are committed within the framework of collective agreements, the amount of the pension claim depends on the number of eligible years of service when the pension payment is scheduled to start as well as on the monthly average salary of the beneficiary. The company pension plans of Jungheinrich Aktiengesellschaft and of Jungheinrich Moosburg GmbH have been closed to wage earners and salaried employees since July 1, 1987, and April 14, 1994, respectively.
In countries outside Germany, several companies have pension plans for managing directors and employees. Material foreign pension claims are covered by separate funds.
In the year under review, a special payment of €25 million was made to the UK pension fund for defined benefit plans.
The pension obligations have been measured in accordance with IAS 19.
The following tables show the pension obligations stated on the consolidated balance sheet and the pension cost disclosed in the consolidated statement of income relating to defined-benefit pension commitments.
Actuarial gains and losses can arise owing to increases or decreases in the net present value of a defined benefit commitment or in the fair value of plan assets, in part stemming from changes in the parameters of actuarial calculations (both financial and biometric). Accumulated unrealized actuarial gains and losses exceeding 10 per cent of the higher of the pension obligation and the fair value of plan assets are amortized over the expected average service lives of the employees covered by the pension plan.
Pension obligations were calculated based on the following weighted average assumptions:
The net pension expense was calculated based on the following weighted average valuation factors:
Funded status of defined benefit pension plans:
The net amount recognized is only included in the balance sheet item ‘Provisions for pensions and similar obligations.’
Development of the defined benefit obligation:
The other changes to the defined benefit obligation in 2007 mainly stem from the fact that the pension plans in place at Jungheinrich AG, Hirschthal (Switzerland), had to be added for the first time to comply with IAS 19.
Plan assets
Plan assets largely comprise separate plans set up to cover pension obligations in the UK. The plan assets and income from the pension funds are exclusively earmarked for pension benefits and to cover the cost of administering the pension plans. Jungheinrich works with outside asset managers to invest in the plan assets
Plan assets are distributed among various portfolios as of December 31, 2008, primarily consisting of fixed-interest securities. Liquid assets in the portfolio as of the balance sheet date will be invested in fixed-interest securities at the beginning of 2009.
Our long-term investment strategy complies with minimum capital cover requirements and the goal of maximizing income from the plan assets while keeping volatility at a reasonable level, in order to minimize the long-term costs of defined benefit pension plans.
Plan asset investments are made while ensuring that cash and cash equivalents are sufficient to cover pension benefits that come due.
Portfolio structure of plan assets based on fair values:
As in the preceding year, externalized pension funds did not include any own financial instruments as of the balance sheet date. Jungheinrich expects the long-term return on plan assets in the portfolio to amount to 4.9 per cent (prior year: 5.1 per cent).
Development of plan assets:
Employer contributions in the year under review include a one-time payment into the pension fund for defined benefit plans in the UK in the amount of €25 million.
The other changes to the plan assets in 2007 mainly stem from the fact that the pension plans in place at Jungheinrich AG, Hirschthal (Switzerland), had to be added for the first time to comply with IAS 19.
Jungheinrich expects cash contributions to plan assets to total about €3.9 million in fiscal 2009, in order to comply with minimum statutory and contractual requirements.
Composition of pension expenses for defined benefit plans in the statement of income:
In the year under review, the actual return on plan assets amounted to €1,537 thousand (prior year: €5,073 thousand).
All of the pension expense components are included in the functional areas’ personnel expenses.
Five-year overview:
Adjustments made based on empirical findings, namely the difference between earlier actuarial assumptions and actual developments relative to the defined benefit obligation and plan assets as of December 31, are presented in the following table:
