The discount rates used for the euro zone (which accounts for 89% of Orange’s pension and other long-term employee benefit obligations) are as follows:
|
December 31, 2017 |
December 31, 2016 |
December 31, 2015 |
|
|
More than 10 years |
1.55% to 1.65% |
1.45% to 1.85% |
2.05% to 2.25% |
|
Less than 10 years |
-0.25% to 1.65%(1) |
-0.10% to 1.45% |
0.10% to 1.05% |
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(1) A -0.25% rate has been used to value the obligation regarding the French part-time for seniors plans (versus -0.10% as at December 31, 2016). |
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The discount rates used for the euro zone are based on corporate bonds rated AA, with a duration equivalent to the duration of the obligations.
The increase in annuities of the Equant plans in the United Kingdom is based on inflation (3.40% used) up to 5%. In France, the revaluation of the annuity-based plan for senior management is based on the INSEE consumer price index (2% used).
The main capital-based defined benefit plan (retirement bonuses for employees under private-law contracts in France) is principally sensitive to employment policy assumptions (Orange has historically had high numbers of staff at retirement age). The estimated increase in the capital of this plan is based on a long-term inflation assumption of 2% associated with the effect of a higher Wage drift – Seniority – Job-skills (GVT). GVT corresponds to the annual change in total payroll costs independent of general or categorical increases in wages and salaries, due to in-grade promotions, out-of- grade promotions and the aging of existing staff.
The impacts on pension benefit obligations of changes in key assumptions would be as follows:
|
(in millions of euros) |
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|
Rate increase by 50 points |
Rate decrease by 50 points |
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Discount rates(1) |
(102) |
110 | ||||||||||||||||||
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Rate decrease by 5% |
Rate increase by 5% |
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Sign-up rates for French part-time for seniors plans(2) |
(22) |
22 | ||||||||||||||||||
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(1) Includes 13 million euros for the French part-time for seniors plans (short term duration). |
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(2) Sensitivity is performed on future entries in French part-time for seniors plans (TPS). Given the advanced state of the plan, the sensitivity effect is reduced as at December 31, 2017. |
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