18. Pensions and other employee obligations

EUR 13.4 million (2018/19: EUR 12.8 million) in expenses were recognized in the income statement for defined contribution severance payments to external employee pension funds.

The major plan asset categories for the periods presented in the Consolidated Financial Statements as of March 31, 2020, are as follows:

The plan assets include treasury shares with a fair value of EUR 0.6 million (March 31, 2019: EUR 0.9 million).

The average expected return is determined by the portfolio structure of the plan assets, empirical data, and estimates of future returns. The calculation of the provisions for pensions was based on an expected (average) interest rate of 1.7% on plan assets. The actual interest rate was –6.9%.

Pension obligations from Group’s Austrian companies are transferred to APK-Pensionskasse Aktiengesellschaft.

The investment policies aim to ensure that the plan assets have the best possible structure and that existing entitlements are covered at all times.

Investment of the plan assets in Austria is governed by Section 25 Austrian Pension Fund Act (Pensionskassengesetz – PKG) and the Austrian Investment Fund Act (Investmentfondsgesetz – InvFG). Above and beyond these statutory requirements, investment guidelines of APK-Pensionskasse Aktiengesellschaft regulate issues such as the range of asset allocation, the use of umbrella funds, and the selection of fund managers. New investment instruments or the use of a broader range of funds require the approval of APK-Pensionskasse Aktiengesellschaft's management board. Both equity and debt securities are diversified globally, but most of the debt securities are denominated or hedged in euros.

The assets of the investment and risk association (Veranlagungs- und Risikogemeinschaft, VRG 15) are invested in international equity and bond funds, alternative investment strategies (e.g., properties and private equity) as well as money market funds. The association’s long-term investment goal is to outperform the benchmark—30% global equities, 55% global bonds, 5% cash, 5% alternatives, and 5% properties—and to cover its current and future payment obligations. In accordance with Section 25 PKG, the assets of VRG 15 are invested in ways that guarantee the security, quality, liquidity, and profitability of the assets allocated to the association on the whole.

Asset allocation or regional allocation that deviate from the benchmark allocation are permitted if APK-Pensionskasse Aktiengesellschaft believes that current asset prices and/or future expected returns warrant such an approach. Active asset management strategies may be utilized for all asset classes if market characteristics and/or cost/benefit considerations justify doing so.

Most of VRG 15’s assets are invested in liquid markets where prices are regularly quoted. Assets for which no active market price is quoted (e.g., certain property assets and private equity strategies) may be subject to conservative approaches as long as the return/risk profile of such assets is deemed advantageous.

Risk is managed actively, and it is generally expected that volatility and especially drawdown risks will be lower than the benchmark risk.

EUR 34.9 million (2018/19: EUR 37.4 million) in expenses were recognized in the income statement for defined contribution plans.

The sensitivity analysis of the key actuarial assumptions used to determine defined benefit obligations affects the DBO as follows:

Group-wide figures were determined for the effects associated with the interest rate, wage and salary increases, and pension increases. The sensitivities are not determined by way of estimates or approximations, but instead by way of comprehensive analyses subject to variation of the parameters.

For the business year 2020/21, the expected contributions to the defined benefit plans are EUR 49.0 million.

The average interest-weighted term of pension plans is 14.9 years, and 10.7 years for severance payments.

Expenses/revenue associated with provisions for severance payments, pensions, and long-service bonuses recognized in the income statement are categorized as follows:

Net interest for the period is recognized in finance costs.