Notes to the Consolidated Financial Statements (continued)
-
-
O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
Inflation risk
Some of the pension obligations are linked to inflation. Higher inflation will lead to higher liabilities, although
in most cases caps on the level of inflationary increases are in place to protect the plan against extreme
inflation. The majority of the plan assets are either unaffected by or loosely correlated with inflation,
meaning that an increase in inflation will increase the deficit.
HEINEKEN provides employees in the Netherlands with an average pay pension plan, whereby indexation
of accrued benefits is conditional on the funded status of the pension fund. In the UK, inflation is partly
managed through the use of a mixture of inflation-linked derivative instruments. These instruments match
49% of the inflation-linked liabilities (2018: 37%).
Life expectancy
The majority of the plans' obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the plans' liabilities. This is particularly significant in the UK plan, where
inflation-linked increases result in higher sensitivity to changes in life expectancy. In 2015, the Trustee of
HEINEKEN UK's pension plan implemented a longevity hedge to remove the risk of a higher increase in life
expectancy than anticipated for the 2015 population of pensioners.
Principal actuarial assumptions as at the balance sheet date
Based on the significance of the Dutch and UK pension plans compared with the other plans, the table
below refers to the major actuarial assumptions for those two plans as at 31 December:
The Netherlands UK1
In
2019
2018
2019
2018
Discount rate as at 31 December
0.9
1.8
2.1
2.9
Future salary increases
2.0
2.0
Future pension increases
0.5
0.8
2.9
3.0
1 The U K plan is closed for future accrual, leading to certain assumptions being equal to zero.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019
Other Information
For the other defined benefit plans, the following actuarial assumptions apply as at 31 December:
Africa, Middle East
Europe Americas Eastern Europe
In
2019
2018
2019
2018
2019
2018
Discount rate as at 31 December
0.3-0.9
1.0-2.9
6.8-14.0
7.0-12.9
0.9-12.4
1.8-15.5
Future salary increases
0.0-3.5
0.0-4.0
0.0-4.5
0.0-4.5
0.0-5.0
2.0-11.4
Future pension increases
0.0-1.5
0.0-3.0
0.0-3.6
0.0-3.5
0.0-2.9
0.0-5.0
Medical cost trend rate
0.0-4.5
0.0-4.5
0.0-13.1
0.0-12.2
0.0-0.0
0.0-0.0
Assumptions regarding future mortality rates are based on published statistics and mortality tables.
For the Netherlands, the rates are obtained from the AG-Prognosetafel 2018', fully generational. For the
UK, the future mortality rates are obtained by applying the Continuous Mortality Investigation 2017
projection model.
The weighted average duration of the defined benefit obligation at the end of the reporting period is
18 years.
HEINEKEN expects the regular contributions to be paid for the defined benefit plans for 2020 to be in line
with 2019. For the pension fund in the Netherlands, a one-off contribution of €85 million is expected to be
paid in late 2020 or early 2021.
Sensitivity analysis
As at the reporting date, changes to one of the relevant actuarial assumptions that are considered
reasonably possible, holding other assumptions constant, would have affected the defined benefit
obligation by the following amounts:
31 December 2019 31 December 2018
Effect in millions of
Increase in
assumption
Decrease in
assumption
Increase in
assumption
Decrease in
assumption
Discount rate (0.5% movement)
(770)
884
(686)
781
Future salary growth
(0.25% movement)
17
(16)
48
(46)
Future pension growth
(0.25% movement)
365
(335)
341
(316)
Medical cost trend rate
(0.5% movement)
6
(5)
4
(3)
Life expectancy (1 year)
393
(392)
339
(341)