At 31 December 2019, the average duration of employee benefit commitments in France is 19.6 years.
| (in %) | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Discount rate/rate of return on assets(1) | Discount rate/rate of return on assets (1)31/12/2019 1.30% | Discount rate/rate of return on assets (1)31/12/2018 2.30% |
| Inflation rate | Inflation rate 31/12/2019 1.30% | Inflation rate 31/12/2018 1.50% |
| Wage increase rate(2) | Wage increase rate (2)31/12/2019 2.40% | Wage increase rate (2)31/12/2018 2.60% |
(1) The interest income generated by assets is calculated using the discount rate. The difference between this interest income and the return on assets is recorded in equity.
(2) Average wage increase rate, including inflation and projected over a full career.
In France, the discount rate used for employee benefit obligations is determined by applying the yield rate on high-quality corporate bonds of appropriate duration to maturities corresponding to the future disbursements resulting from these obligations. For longer durations, the calculation also takes into consideration data from a wider selection of corporate bonds adjusted for comparability with the high-quality bonds, given the smaller panel of bonds with these durations since 2017. The substantial decrease in the discount rate (100 bp) essentially relates to the decrease in risk-free rates observed over 2019.
Changes at 31 December 2019 in the economic and market parameters used have led the Group to set the discount rate at 1.30% at 31 December 2019 (2.30% at 31 December 2018).
Until 31 December 2018, the assumed inflation rate used was determined in line with the consensus forecast and expected inflation based on the returns on inflation-linked bonds. From 2019, as declining forecasts made short-term consensus forecast projections less appropriate, the inflation rate used was deduced from inflation swaps
As a result, the assumed average inflation rate used as the Group’s benchmark for Euro zone countries is 1.3% at 31 December 2019 (1.5% at 31 December 2018).
The wage law used to calculate obligations was updated in 2019 by applying wage increase rates observed over the period 2015-2018 (adjusted for non-recurring effects), instead of the changes observed over the period 2010-2012 adjusted by a coefficient to reflect the lower expected long-term wage increases. This update had no significant impact on the valuation of the obligations.
The mortality table used to calculate obligations is adjusted for specificities of the IEG (gas and electricity sector) system; in 2018 it was updated by using the INSEE 2013-2070 generation table (produced by the French statistics office), instead of the INSEE 2007-2060 generation table.
Sensitivity analyses on the amount of the obligation are as follows:
| (in %) | 31/12/2019 |
|---|---|
| Impact of a 25bp increase or decrease in the discount rate | Impact of a 25bp increase or decrease in the discount rate 31/12/2019 -4.8% / +5.2% |
| Impact of a 25bp increase or decrease in the inflation rate | Impact of a 25bp increase or decrease in the inflation rate 31/12/2019 +4.6% / -4.9% |
| Impact of a 25bp increase or decrease in the wage increase rate | Impact of a 25bp increase or decrease in the wage increase rate 31/12/2019 +4.6% / -4.3% |
The United Kingdom segment chiefly comprises EDF Energy, whose principal employee benefits are described in note 1.3.21.
| (in millions of euros) | Obligations | Fund assets | Net liability |
|---|---|---|---|
| Balances at 31/12/2018 | Balances at 31/12/2018 Obligations 8,248 | Balances at 31/12/2018 Fund assets (9,039) | Balances at 31/12/2018 Net liability (791) |
| Net expense for 2019 | Net expense for 2019 Obligations 473 | Net expense for 2019 Fund assets (263) | Net expense for 2019 Net liability 210 |
| Actuarial gains and losses | Actuarial gains and losses Obligations 873 | Actuarial gains and losses Fund assets (998) | Actuarial gains and losses Net liability (125) |
| Employer’s contributions to funds | Employer’s contributions to funds Obligations - | Employer’s contributions to funds Fund assets (269) | Employer’s contributions to funds Net liability (269) |
| Employees’ contributions to funds | Employees’ contributions to funds Obligations 11 | Employees’ contributions to funds Fund assets (11) | Employees’ contributions to funds Net liability - |
| Benefits paid | Benefits paid Obligations (369) | Benefits paid Fund assets 369 | Benefits paid Net liability - |
| Translation adjustment | Translation adjustment Obligations 454 | Translation adjustment Fund assets (501) | Translation adjustment Net liability (47) |
| BALANCES AT 31/12/2019 | BALANCES AT 31/12/2019 Obligations 9,690 | BALANCES AT 31/12/2019 Fund assets (10,712) | BALANCES AT 31/12/2019 Net liability (1,022) |
| Including: | |||
| Provisions for employee benefits | Provisions for employee benefits Obligations - | Provisions for employee benefits Fund assets - | Provisions for employee benefits Net liability 224 |
| Non-current financial assets | Non-current financial assets Obligations - | Non-current financial assets Fund assets - | Non-current financial assets Net liability (1,246) |
