ING Direct 2015 Annual Report Download - page 101

Contents
Who we are
Report of the
Management
Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Notes to the Consolidated annual accounts of ING Bank - continued
Net defined benefit
asset/liability
Other post-employment
benefits
2015
2014
2015
2014
Discount rates
3.00
2.60
3.20
2.30
Mortality rates
0.80
0.70
0.80
1.00
Expected rates of salary increases (excluding promotion increases)
3.70
3.40
Indexation
2.60
2.60
2.00
2.00
The assumptions above are weighted by defined benefit obligations. The rates used for salary developments, interest discount factors
and other adjustments reflect country-specific conditions.
The discount rate is the weighted average of the discount rates that are applied in different regions where the Bank has defined
benefit pension plans. The discount rate is based on a methodology that uses market yields on high quality corporate bonds of the
specific regions with durations matching the pension liabilities as key input. Market yields of high quality corporate bonds reflect the
yield on corporate bonds with an AA rating for durations where such yields are available. An extrapolation is applied in order to
determine the yield to the longer durations for which no AA-rated corporate bonds are available. As a result of the limited availability
of long-duration AA-rated corporate bonds, extrapolation is an important element of the determination of the discount rate.
The discount rate is approximately 3.0% on 31 December 2015 (2014: 2.6%). The discount rate used by ING is based on AA-rated
corporate bonds. Discussions were ongoing, both in the industry and at the IASB, on the definition of the discount rate for defined
benefit pension liabilities and ING would reconsider the methodology for setting the discount rate if and when appropriate.
As at 31 December 2015, the actuarial assumption for Indexation for inflation is 2.6% (2014: 2.6%). The percentage for 2015 was
mainly based on the expected inflation and the best estimate assumption for future indexation in the pension plans in the United
Kingdom and Belgium (2014: United Kingdom, Belgium and the Netherlands; before 2014 the percentage was based on the plan in the
Netherlands).
Sensitivity analysis of key assumptions
The sensitivity analysis of the most significant assumptions has been determined based on changes of the assumptions occurring at
the end of the reporting period that are deemed reasonably possible.
The table discloses the financial impact on the defined benefit obligation if the weighted averages of each significant actuarial
assumption would increase or decrease if all other assumptions were held constant. In practice, this is unlikely to occur, and some
changes of the assumptions may be correlated.
Financial impact
of increase
Financial impact
of decrease
2015
2014
2015
2014
Discount rates – increase/decrease of 1%
–451
–403
554
500
Mortality – increase/decrease of 1 year
82
93
–82
–93
Expected rates of salary increases (excluding promotion increases) – increase/decrease of
0.25%
25 29 –23 –27
Indexation – increase/decrease 0.25%
75
93
–74
–84
Expected cash flows
Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued liabilities of the plans calculated in
accordance with local legal requirements. Plans in all countries comply with applicable local regulations governing investments and
funding levels. ING Bank’s subsidiaries should fund the cost of the entitlements expected to be earned on a yearly basis.
For 2016 the expected contributions to pension plans are EUR 50 million.
Weighted averages of basic actuarial assumptions in annual % as at 31 December
Sensitivity analysis – financial impact of changes in significant actuarial assumptions on the defined benefit obligation
ING Bank Annual Report 2015 99