Logotype

financial statements 2012

26. Pensions and other post-employment commitments

Print this page

As stated in Note 2.2.12, the Group has both defined-benefit and defined-contribution post-employment commitments with employees; the latter are gradually increasing mainly because it is the scheme being applied to new hires and because pre-existing defined-benefit commitments have been mostly closed.

26.1 Defined-contribution commitments

The defined-contribution commitments are settled through contributions made by the Group annually on behalf of its beneficiaries, who are, almost exclusively, active employees in the Group. These contributions are accrued and charged to the consolidated income statement in the corresponding financial year (see Note 2.2.12). No liability is therefore recognized in the accompanying consolidated balance sheets for this purpose.

The amounts registered in the accompanying consolidated income statements for contributions to these plans in 2012, 2011 and 2010 are €85 million, €80 million and €84 million, respectively (see Note 46.1).

26.2 Defined-benefit plans and other long-term commitments

Pension commitments in defined-benefit plans correspond mainly to employees who have retired or taken early retirement from the Group and to certain groups of employees still active in the Group in the case of pension benefits, and to most active employees in the case of permanent disability and death benefits.

A breakdown of the Group’s total amounts for pension commitments in defined-benefit plans and other post-employment commitments (such as early retirement and welfare benefits) for the last five years can be found in the table below. The commitments are recognized under the heading "Provisions – Provisions for pensions and similar obligations" of the corresponding accompanying consolidated balance sheets (see Note 25).

Excel Download Excel
Commitments and Plan Assets in Defined-Benefit Plans and Other Post-Employment Commitments Millions of Euros
2012 2011 2010 2009 2008
Pension and post-employment benefits 8.224 7.680 8.082 7.996 7.987
Assets and insurance contracts coverage 2.430 2.122 2.102 1.750 1.628
Net assets (2) (19) - - -
Net liabilities (*) 5.796 5.577 5.980 6.246 6.359
(*) Registered under the heading “Provisions - Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets

This information is presented below in greater detail, broken down by beneficiaries from Group companies in Spain and other beneficiaries, for 2012, 2011 and 2010.

Excel Download Excel
Pensions and Early-Retirement Commitments and Welfare Benefits: Spain and Abroad Millions of Euros
Commitments in Spain Commitments Abroad Total BBVA Group
2012 2011 2010 2012 2011 2010 2012 2011 2010
Post-employment benefits








Pension commitments 3,029 2,773 2,857 1,232 1,026 1,122 4,261 3,799 3,979
Early retirements 2,758 2,904 3,106 - - - 2,758 2,904 3,106
Post-employment welfare benefits 221 204 220 984 773 777 1,205 977 997
Total post-employment benefits (1) 6,008 5,881 6,183 2,216 1,799 1,899 8,224 7,680 8,082
Insurance contracts coverage








Pension commitments 389 379 430 - - - 389 379 430
Other plan assets








Pension commitments - - - 1,145 1,010 1,052 1,145 1,010 1,052
Post-employment welfare benefits - - - 895 733 620 895 733 620
Total plan assets and insurance contracts coverage (2) 389 379 430 2,041 1,743 1,672 2,430 2,122 2,102
Total net commitments (1) - (2) 5,619 5,502 5,753 175 56 227 5,794 5,558 5,980
of which:








Net assets - - - (2) (19) - (2) (19) -
Net liabilities (*) 5,619 5,502 5,753 177 75 227 5,796 5,577 5,980
(*) Registered under the heading “Provisions - Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets

The balance under the heading “Provisions - Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets as of December 31, 2012 includes €245 million, for commitments for post-employment benefits maintained with previous members of the Board of Directors and the Bank’s Management Committee.

In addition to the commitments to employees indicated above, the Group has other less relevant commitments. These include long-service awards granted to certain groups of employees when they complete a given number of years of effective service.

As of December 31, 2012, 2011 and 2010, the actuarial liabilities for the outstanding awards amounted to €50 million, €43 million and €39 million, respectively. Of those sums, €11 million (in the three years) corresponded to Spanish companies and €39 million, €32 million and €28 million to companies and branches abroad, respectively. The commitments above are recognized under the heading "Other provisions" of the accompanying consolidated balance sheets (see Note 25).

The net charges registered in the accompanying consolidated income statements and under the heading “Equity" of the accompanying consolidated balance sheets (see Note 2.2.12) for the commitments in post-employment benefits in entities in Spain and abroad are as follows:

Excel Download Excel
Total Post-employments Benefits BBVA Group:
Income Statements and Equity Effects.		 Notes Millions of Euros
2012 2011 2010
Interest and similar expenses 39.2 257 259 259
Interest cost
366 376 375
Expected return on plan assets
(110) (118) (116)
Personnel expenses
141 131 121
Defined-contribution plan expense 46.1 85 80 84
Defined-benefit plan expense 46.1 56 51 37
Other personnel expenses - Welfare benefits
- - -
Provision - Pension funds and similar obligations 48 447 365 405
Pension funds
- 13 9
Early retirements
373 290 301
Other provisions
74 62 95
Total Effects in Income Statements: Debit (Credit)
844 755 785
Total Effects in equity: Debit (Credit) (*)
321 9 64
(*) Correspond to actuarial losses (gains) arising from pension commitments and certain welfare benefits recognized in ”Valuation Adjustments”. For Early retirements are recognized in the Income Statements (see Note 2.2.12.).

26.2.1Commitments in Spain

The most significant actuarial assumptions used as of December 31, 2012, 2011 and 2010 to quantify these commitments with employees in Spain are as follows:

Excel Download Excel
Actuarial Assumptions
Commitments with employees in Spain		 2012 2011 2010
Mortality tables PERM/F 2000P. PERM/F 2000P. PERM/F 2000P.
Discount rate (cumulative annual) 3.5% 4.5% 4.5%
Consumer price index (cumulative annual) 2% 2% 2%
Salary growth rate (cumulative annual) At least 3% At least 3% At least 3%
Retirement age First date at which the employees are entitled to retire or contractually agreed at the individual level in the case of early retirements
(*) The interest rate used to discount the commitments has been determined by reference to high quality corporate bonds (Note 2.212).

Changes in the main assumptions can affect the calculation of the commitments. Should the discount interest rate have increased or decreased by 50 basis points, an impact on equity for the commitments in Spain would have been registered for approximately €128 million and €138 million net of tax, with a charge in “Valuation adjustments”.

The breakdown of the various commitments to employees in Spain is as follows:

Pension commitments

To fund some pension commitments in Spain, insurance contracts have been written with insurance companies not related to the Group. These commitments are funded by plan assets and therefore are presented in the accompanying consolidated balance sheets for the net amount of the commitment less plan assets. As of December 31, 2012, 2011 and 2010, the plan assets related to the aforementioned insurance contracts (for €389 million, €379 million and €430 million, respectively) equaled the amount of the commitments covered; therefore, no amount for this item has been recorded in the accompanying consolidated balance sheets.

The rest of commitments for pensions in Spain include defined-benefit commitments for which insurance has been contracted with BBVA Seguros, S.A. de Seguros y Reaseguros, which is 99.95% owned by the Group. As it is an entity consolidated within the BBVA Group, the assets in which the insurance company has invested the amount of the policies cannot be considered plan assets under IAS 19 and are presented in the accompanying consolidated balance sheets under different headings of "assets", depending on the classification of their corresponding financial instruments. The commitments are recognized under the heading "Provisions – Provisions for pensions and similar obligations" of the accompanying consolidated balance sheets (see Note 25).

Early retirement

In 2012, the Spanish companies in the Group offered certain employees the possibility of taking early retirement before the age stipulated in the collective labor agreement in force. This offer was accepted by 633 employees (669 and 683 in 2011 and 2010, respectively).

The early retirement commitments in Spain as of December 31, 2012, 2011 and 2010 are recognized under the heading “Provisions – Provisions for pensions and similar obligations” (see Note 25) in the accompanying consolidated balance sheets and amount to €2,758 million, €2,904 million and €3,106 million, respectively.

The cost of early retirement for the year is recognized under the heading “Provisions expense (net) – Provisions for pensions and similar obligations” in the accompanying consolidated income statements (see Note 48).

Changes in commitments with employees

The changes in the net commitments with employees in Spain in 2012, 2011 and 2010 are as follows:

Excel Download Excel
Net Commitments in Spain:
Changes in the year 2012		 Millions of Euros
Pensions Early
Retirements		 Welfare
Benefits		 Total
Spain
Balance at the Beginning 2,394 2,904 204 5,502
Interest cost 105 110 9 224
Expected return on plan assets - - - -
Current service cost 9 - 3 11
Cost for early retirements - 239 - 239
Past service cost or changes in the plan - - - -
Benefits paid in the period (175) (609) (17) (801)
Acquisitions and divestitures 25 37 3 65
Effect of curtailments and settlements - - - -
Contributions in the period - - - -
Actuarial gains and losses 282 80 17 379
Exchange differences - - - -
Other changes - (3) 3 -
Balance at the End 2,640 2,758 221 5,619
of which:



Commitments to retired employees 2,484 2,758 161 5,403
Vested contingencies in respect of current employees 156 - 60 216
Excel Download Excel
Net Commitments in Spain:
Changes in the year 2011		 Millions of Euros
Pensions Early
Retirements		 Welfare
Benefits		 Total
Spain
Balance at the Beginning 2,427 3,106 220 5,753
Interest cost 106 121 10 237
Expected return on plan assets - - - -
Current service cost 10 - 2 12
Cost for early retirements - 297 - 297
Past service cost or changes in the plan - - - -
Benefits paid in the period (161) (611) (18) (790)
Acquisitions and divestitures - - - -
Effect of curtailments and settlements - - - -
Contributions in the period - - - -
Actuarial gains and losses 10 (3) (4) 3
Exchange differences - - - -
Other changes 2 (6) (6) (10)
Balance at the End 2,394 2,904 204 5,502
of which:



Commitments to retired employees 2,290 2,904 162 5,356
Vested contingencies in respect of current employees 104 - 42 146
Excel Download Excel
Net Commitments in Spain:
Changes in the year 2011		 Millions of Euros
Pensions Early
Retirements		 Welfare
Benefits		 Total
Spain
Balance at the Beginning 2,491 3,309 222 6,022
Interest cost 107 127 10 244
Expected return on plan assets - - - -
Current service cost 4 - 2 6
Cost for early retirements - 296 - 296
Past service cost or changes in the plan - - - -
Benefits paid in the period (170) (627) (18) (815)
Acquisitions and divestitures - - - -
Effect of curtailments and settlements - - - -
Contributions in the period - - - -
Actuarial gains and losses (9) 6 (1) (4)
Exchange differences - - - -
Other changes 4 (5) 5 4
Balance at the End 2,427 3,106 220 5,753
of which:



Commitments to retired employees 2,335 3,106 180 5,621
Vested contingencies in respect of current employees 92 - 40 132

26.2.2 Commitments abroad

The main defined-benefit plans with employees abroad correspond to those in Mexico, Portugal and the United States, which jointly account for 91% of the total commitments with employees abroad as of December 31, 2012, and 25% of the total commitments with employees in the Group as a whole (94% and 22%, and 95% and 22%, respectively, as of December 31, 2011 and 2010). These commitments are not available for new employees.

As of December 31, 2012, 2011 and 2010, the breakdown by country of the various commitments with employees of the BBVA Group abroad is as follows:

Excel Download Excel
Post-Employment Commitments Abroad Millions of Euros
Comitments Plan Assets Net Commitments

2012 2011 2010 2012 2011 2010 2012 2011 2010
Pension Commitments








Mexico 573 491 508 606 520 519 (33) (29) (11)
The United States 313 285 236 293 283 191 20 2 45
Portugal 170 154 288 173 154 290 (3) 0 (2)
Rest of countries 176 97 90 73 53 52 103 44 38
Subtotal 1,232 1,027 1,122 1,145 1,010 1,052 87 16 70
Post-Employment Welfare Benefits








Mexico 969 761 766 895 732 620 74 29 146
The United States - - - - - - - - -
Portugal - - - - - - - - -
Rest of countries 15 12 11 - 1 - 15 11 11
Subtotal 984 773 777 895 733 620 89 40 157
Total 2,216 1,800 1,899 2,041 1,743 1,672 175 57 227

The plan assets related to these commitments are to be used directly to settle the vested obligations and meet the following conditions: they are not owned by the Group entities, they are available only to pay post-employment benefits, and they cannot be returned to the Group entities.

The vested obligations related to these commitments are presented in the accompanying consolidated balance sheets net of the plan assets under the heading “Provisions - Provisions for pensions and similar obligations” (see Note 25).

Commitments with employees in Mexico

In Mexico, the main actuarial assumptions used in quantifying the commitments with employees as of December 31, 2012, 2011 and 2010, are as follows:

Excel Download Excel
Post-Employment Actuarial Assumptions in Mexico 2012 2011 2010
Mortality tables EMSSA 97 EMSSA 97 EMSSA 97
Discount rate (cumulative annual) 8.20% 8.75% 8.75%
Consumer price index (cumulative annual) 3.75% 3.75% 3.75%
Medical cost trend rate 6.75% 6.75% 6.75%
Expected rate of return on plan assets 7.00% 8.25% 9.00%
  • Pension commitments in Mexico: The changes in these commitments and plan assets in 2012, 2011 and 2010 for all of the Group’s companies in Mexico are as follows:
Excel Download Excel
Pension Commitments and Plan Assets in Mexico: Changes in the period Millions of Euros
Commitments Plan Assets Net Commitments
2012 2011 2010 2012 2011 2010 2012 2011 2010
Balance at the Beginning 491 508 398 520 519 424 (29) (11) (26)
Interest cost 44 41 40 - - - 44 41 40
Expected return on plan assets - - - 38 40 42 (38) (40) (42)
Current service cost 8 7 7 - - - 8 7 7
Past service cost or changes in the plan (11) - 8 - - - (11) - 8
Benefits paid in the period (37) (34) (36) (37) (34) (36) - - (0)
Effect of curtailments and settlements - - - - - - - - -
Contributions in the period - - - 1 30 45 (1) (30) (45)
Actuarial gains and losses 53 7 33 58 5 66 (5) 2 (33)
Exchange differences 25 (40) 57 26 (41) 61 (1) 1 (4)
Other changes - 2 - - 1 (83) - 1 83
Balance at the End 573 491 508 606 520 519 (33) (29) (11)

As of December 31, 2012, 2011 and 2010, the plan assets covering these obligations correspond entirely to fixed-income securities. In 2012, 2011 and 2010, the return on these assets amounted to €96 million, €45 million and €108 million, respectively.

  • Post-employment welfare benefits in Mexico: The changes in these commitments and plan assets in 2012, 2011 and 2010 for all the Group’s companies in Mexico are as follows:
Excel Download Excel
Welfare Benefits Commitments and Plan Assets in Mexico: Changes in the period Millions of Euros
Commitments Plan Assets Net Commitments
2012 2011 2010 2012 2011 2010 2012 2011 2010
Balance at the Beginning 761 766 511 732 620 342 29 146 169
Interest cost 70 63 54 - - - 70 63 54
Expected return on plan assets - - - 55 50 45 (55) (50) (45)
Current service cost 26 24 19 - - - 26 24 19
Past service cost or changes in the plan - - - - - - - - -
Benefits paid in the period (26) (23) (18) (26) (23) (18) - - -
Effect of curtailments and settlements (7) (10) - - - - (7) (10) -
Contributions in the period - - - 2 124 69 (2) (124) (69)
Actuarial gains and losses 108 8 127 96 15 49 12 (7) 78
Exchange differences 38 (67) 73 37 (54) 49 1 (13) 24
Other changes - - - - - 84 - - (84)
Balance at the End 969 761 766 895 732 620 75 29 146

As of December 31, 2012, 2011 and 2010, the plan assets covering these obligations corresponded entirely to fixed-income securities, whose return amounted to €151 million, €65 million and €94 million, respectively.

The sensitivity analysis to changes in medical cost trend rates for 2012 is as follows:

Excel Download Excel
Welfare Benefits in Mexico. Sensitivity Analysis Millions of Euros
1%
Increase		 1%
Decrease
Increase/Decrease in current service cost and interest cost 26 (20)
Increase/Decrease in commitments 197 (154)
Pension commitments in the United States

In the United States, the main actuarial assumptions used in quantifying the commitments with employees as of December 31, 2012, 2011 and 2010, are as follows:

Excel Download Excel
Post-Employment Actuarial Assumptions in the United States 2012 2011 2010
Mortality tables RP 2000
Projected & adjusted		 RP 2000
Projected & adjusted		 RP 2000
Projected
Discount rate (cumulative annual) 4.03% 4.28% 5.44%
Consumer price index (cumulative annual) 2.50% 2.50% 2.50%
Salary growth rate (cumulative annual) 3.50% 3.50% 3.50%
Expected rate of return on plan assets 3.20% 6.41% 7.50%

The changes of these commitments and plan assets in 2012, 2011 and 2010 for all of the Group’s companies in the United States are as follows:

Excel Download Excel
Pensions Net Commitments in the United States
Changes in the period		 Millions of Euros
Commitments Plan Assets Net Commitments

2012 2011 2010 2012 2011 2010 2012 2011 2010
Balance at the Beginning 285 236 195 283 191 163 2 45 32
Interest cost 13 11 12 - - - 13 11 12
Expected return on plan assets - - - 9 14 13 (9) (14) (13)
Current service cost 6 4 5 - - - 6 4 5
Cost for early retirements - - - - - - - - -
Past service cost or changes in the plan - - - - - - - - -
Benefits paid in the period (8) (9) (7) (5) (8) (7) (3) (1) -
Acquisitions and divestitures - (8) - - (8) - - - -
Effect of curtailments and settlements - (3) - - - - - (3) -
Contributions in the period - - - - 33 2 - (33) (2)
Actuarial gains and losses 20 46 16 8 53 7 12 (7) 9
Exchange differences (5) 7 14 (5) 6 12 0 1 2
Other changes 2 - 1 3 2 - (1) (2) 1
Balance at the End 313 285 236 293 283 191 20 2 45

The distribution of the main categories of plan assets related to these commitments as of 31 December, 2012, 2011 and 2010 for all the companies in the United States is as follows:

Excel Download Excel
Plan Assets Categories for Pension Commitments in the United States Percentage
2012 2011 2010
Equity instruments - - 62.4
Debt securities 98.7 93.0 35.7
Property, Land and Buildings - - -
Cash 1.3 7.0 1.9
Other investments - - -

In 2012, 2011 and 2010, the return on plan assets related to these pension commitments reached €17 million, €67 million, and €20 million, respectively.

Post-employment and welfare benefits in other countries

The changes in these commitments and plan assets in 2012, 2011 and 2010 for all of the Group’s remaining companies abroad are as follows:

Excel Download Excel
Pensions Net Commitments ans Welfare Benefits in Other Countries. Changes in the period Millions of Euros
Commitments Plan Assets Net Commitments
2012 2011 2010 2012 2011 2010 2012 2011 2010
Balance at the Beginning 263 389 414 209 341 365 54 47 49
Interest cost 17 24 25 - - - 17 24 25
Expected return on plan assets - - (2) 8 14 14 (8) (14) (16)
Current service cost 4 4 1 - - - 4 4 1
Cost for early retirements - 13 9 - - - - 13 9
Past service cost or changes in the plan 52 - (1) - - (2) 52 - 1
Benefits paid in the period (10) (190) (16) (0) (186) (16) (10) (3) -
Acquisitions and divestitures - (1) - - (1) - - 0 -
Effect of curtailments and settlements - - - - - - - - -
Contributions in the period 0 (1) (1) 3 35 19 (3) (36) (20)
Actuarial gains and losses 30 (3) (26) 13 (14) (44) 17 11 18
Exchange differences (3) - 4 (1) - - (2) - 4
Other changes 9 27 (18) 14 21 5 (5) 6 (23)
Balance at the End 363 263 389 246 209 341 117 54 47

26.2.3 Estimated future payments for commitments with BBVA Group employees

The estimated benefit payments over the next ten years for all the companies in Spain, Mexico, Portugal and the United States are as follows:

Excel Download Excel
Expected Future Benefits for Post-Employment Commitments Millions of Euros
2013 2014 2015 2016 2017 2018-2022
Commitments Spain 784 711 652 587 516 1,619
Of which early retirement Spain 581 520 463 400 329 737
Commitments Mexico 67 67 72 79 86 520
Commitments Portugal - - - - - -
Commitments The United States 10 10 11 12 13 78
Total 861 789 736 678 615 2,217
Tools