Volvo 2013 Annual Report Download - page 153

Net provisions for post-employment benefi ts Sweden
Pensions US Pensions France Pensions
Great
Britain
Pensions
US
Other
benefi ts Other plans Total
Net provision for post-employment benefi ts
as of December 31, 2012 (6,203) (4,537) (1,996) 97 (3,714) (2,482) (18,835)
of which reported as:
B/S Provisions for post-employment benefi ts (6,203) (4,537) (1,996) 97 (3,714) (2,482) (18,835)
Net provisions for post-employment benefi ts
as of December 31, 2013 (3,104) (1,770) (2,349) (41) (3,158) (1,878) (12,300)
of which reported as:
B/S Prepaid pensions – 11 – – – 11 22
B/S Provisions for post-employment benefi ts (3,104) (1,781) (2,349) (41) (3,158) (1,889) (12,322)
Actual return on plan assets amounted to 2,348 (2,137).
Fair value of plan assets
with a quoted market price Dec 31, 2013 Dec 31, 2012
Cash and cash equivalents 232 419
Equity instruments 11,247 9,440
Debt instruments 11,423 9,939
Real estate 149 260
Derivatives 7 11
Investments funds 784 629
Assets held by insurance company 573 541
Other assets 17 0
Total 24,432 21,239
Investment strategy and risk management
The Volvo Group manages the allocation and investment of pension plan
assets with the purpose of meeting the long term objectives. The main
objectives are to meet present and future benefi t obligations, provide suf-
fi cient liquidity to meet such payment requirements and to provide a total
return that maximizes the ratio of the plan assets in relation to the plan
liabilities by maximizing return on the assets at an appropriate level of risk.
The fi nal investment decision often resides with the local trustee, but the
investment policy for all plans ensures that the risks in the investment
portfolios are well diversifi ed. The risks related to pension obligations, e.g.,
longevity and infl ation, as well as buy out premiums and matching strate-
gies are monitored on an ongoing basis in order to limit the Volvo Group’s
exposure.
In the last couple of years, some of the defi ned benefi t plans have been
closed to new entrants and replaced by defi ned contribution plans in
order to reduce risk for the Volvo Group.
In Sweden the minimum funding target is decided by PRI Pensions-
garanti, this is mandatory in order to stay in the system and get insurance
for the pension liability. The minimum contribution is decided by the com-
pany and should equal at least the pension benefi ts expected to be earned
during the coming year.
In the United States the minimum funding target is decided by the com-
pany in order to avoid penalties, keep fl exibility and avoid extensive fi ling
with the IRS and participants. The minimum contribution should equal at
least the benefi ts expected to be earned during the coming year + 1/7 of
the underfunding.
In Great Britain there are no minimum funding requirements. For each
plan there is a contribution plan, which is well defi ned, in place to bring the
schemes to full funding within a reasonable time frame. The contribution
plans are to to be approved by regulators.
In 2014, the Volvo Group estimates to transfer an amount of SEK 1-2
billion to pension plans.
Plan assets by category as of December 31, 2012
Cash and cash equivalents, 718 (3%)
Equity instruments, Volvo, 333 (1%)
Equity instruments, other, 10,336 (42%)
Debt instruments, 10,968 (45%)
Real estate, 855 (3%)
Investments funds, 628 (3%)
Assets held by insurance company, 525 (2%)
Other assets, 255 (1%)
Cash and cash equivalents, 1,109 (4%)
Equity instruments, Volvo, 343 (1%)
Equity instruments, other, 12,193 (44%)
Debt instruments, 11,438 (41%)
Real estate, 839 (3%)
Investments funds, 786 (3%)
Assets held by insurance company, 702 (3%)
Other assets, 243 (1%)
Plan assets by category as of December 31, 2013
149