41 Defined benefit plans


	2018		2017
Retirement benefit plans		3,714		3,657
Other post-employment benefit plans		275		293
Total defined benefit plans		3,989		3,950

Retirement benefit plans in surplus		-		55
Other post-employment benefit plans in surplus		-		-
Total defined benefit assets		-		55

Retirement benefit plans in deficit		3,714		3,712
Other post-employment benefit plans in deficit		275		293
Total defined benefit liabilities		3,989		4,005


				2018								2017
Movements during the year in defined benefit plans	Retirement benefit plans			Other post- employment benefit plans			Total		Retirement benefit plans			Other post- employment benefit plans			Total
At January 1		3,657			293			3,950		4,453			314			4,767
Defined benefit expenses		192			13			206		242			19			262
Remeasurements of defined benefit plans		157			(23	)		134		(233	)		10			(224	)
Contributions paid		(234	)		-			(234)		(163	)		-			(163	)
Benefits paid		(99	)		(19	)		(118)		(108	)		(19	)		(128	)
Net exchange differences		37			11			47		(133	)		(31	)		(164	)
Other		5			-			5		(400	)		-			(400	)
At December 31		3,714			275			3,989		3,657			293			3,950

Other in 2017 reflects the reclassification of the pension contract relating to the personnel of Unirobe Meeùs Groep (UMG) from defined benefit plans to insurance contracts for account of policyholders following the sale of UMG in November 2017.

The amounts recognized in the statement of financial position are determined as follows:


				2018								2017
	Retirement benefit plans			Other post- employment benefit plans		Total			Retirement benefit plans			Other post- employment benefit plans		Total
Present value of wholly or partly funded obligations		4,027			-		4,027			4,389			-		4,389
Fair value of plan assets		(3,525	)		-		(3,525	)		(3,622	)		-		(3,622	)
		502			-		502			767			-		767
Present value of wholly unfunded obligations ¹		3,212			275		3,487			2,890			293		3,183
At December 31		3,714			275		3,989			3,657			293		3,950

As all pension obligations are insured at subsidiary Aegon Levensverzekering almost all assets held by Aegon Nederland backing retirement benefits of EUR 2,568 million (2017: EUR 2,457 million) do not meet the definition of plan assets and as such were not deducted in calculating this amount. Instead, these assets are recognized as general account assets. Consequently, the return on these assets does not form part of the calculation of defined benefit expenses.

The fair value of Aegon’s own transferable financial instruments included in plan assets and the fair value of other assets used by Aegon included in plan assets was nil in both 2018 and 2017.


				2018									2017
Defined benefit expenses	Retirement benefit plans			Other post- employment benefit plans			Total			Retirement benefit plans			Other post- employment benefit plans			Total
Current year service cost		121			10			131			148			11			158
Net interest on the net defined benefit liability (asset)		87			8			96			99			10			109
Past service cost		(16	)		(5	)		(21	)		(5	)		(1	)		(6	)
Total defined benefit expenses		192			13			206			242			19			262

													2016
										Retirement benefit plans			Other post- employment benefit plans			Total
Current year service cost											127			13			140
Net interest on the net defined benefit liability (asset)											123			11			134
Past service cost											53			(2	)		50
Total defined benefit expenses											302			22			324

Defined benefit expenses are included in ‘Commissions and expenses’ in the income statement.


Movements during the year of the present value of the defined benefit obligations	2018			2017
At January 1		7,572			8,560
Acquisition of subsidiary		-			-
Current year service cost		131			158
Interest expense		213			230
Remeasurements of the defined benefit obligations:
- Actuarial gains and losses arising from changes in demographic assumptions		(28	)		30
- Actuarial gains and losses arising from changes in financial assumptions		(102	)		29
Past service cost		(21	)		(6	)
Contributions by plan participants		11			12
Benefits paid		(409	)		(523	)
Net exchange differences		144			(519	)
Other		5			(400	)
At December 31		7,514			7,572


Movements during the year in plan assets for retirement benefit plans	2018			2017
At January 1		3,622			3,793
Interest income (based on discount rate)		117			121
Remeasurements of the net defined liability (asset)		(264	)		283
Contributions by employer		245			175
Benefits paid		(291	)		(396	)
Net exchange differences		96			(355	)
At December 31		3,525			3,622


			2018								2017
Breakdown of plan assets for retirement benefit plans	Quoted		Unquoted		Total		in % of total plan assets		Quoted		Unquoted		Total		in % of total plan assets
Equity instruments		106		5		111		3%		127		4		131		4%
Debt instrument		369		343		712		20%		397		411		809		22%
Real estate		-		111		111		3%
Derivatives		-		149		149		4%		-		254		254		7%
Investment funds		11		1,945		1,956		55%		5		2,027		2,032		56%
Structured securities		-		-		-		0%		-		-		-		0%
Other		14		471		484		14%		25		372		397		11%
At December 31		500		3,025		3,525		100%		554		3,068		3,622		100%

Defined benefit plans are mainly operated by Aegon USA, Aegon the Netherlands and Aegon UK. The following sections contain a general description of the plans in each of these subsidiaries and a summary of the principal actuarial assumptions applied in determining the value of defined benefit plans.

Aegon USA

Aegon USA has defined benefit plans covering substantially all its employees that are qualified under the Internal Revenue Service Code, including all requirements for minimum funding levels. The defined benefit plans are governed by the Board of Managers of Transamerica Corporation. The Board of Managers has the full power and discretion to administer the plan and to apply all of its provisions, including such responsibilities as, but not limited to, developing the investment policy and managing assets for the plan, maintaining required funding levels for the plan, deciding questions related to eligibility and benefit amounts, resolving disputes that may arise from plan participants and for complying with the plan provisions, and legal requirements related to the plan and its operation. The benefits are based on years of service and the employee’s eligible annual compensation. The plans provide benefits based on a traditional final average formula or a cash balance formula (which defines the accrued benefit in terms of a stated account balance), depending on the age and service of the plan participant. The defined benefit plans have a deficit of EUR 450 million at December 31, 2018 (2017: EUR 629 million deficit).

Investment strategies are established based on asset and liability studies by actuaries which are updated as they consider appropriate. These studies, along with the investment policy, assist to develop the appropriate investment criteria for the plan, including asset allocation mix, return objectives, investment risk and time horizon, benchmarks and performance standards, and restrictions and prohibitions. The overall goal is to maximize total investment returns to provide sufficient funding for the present and anticipated future benefit obligations within the constraints of a prudent level of portfolio risk and diversification. Aegon believes that the asset allocation is an important factor in determining the long-term performance of the plan. The plan uses multiple asset classes as well as sub-classes to meet the asset allocation and other requirements of the investment policy, which minimizes investment risk. From time to time the actual asset allocation may deviate from the desired asset allocation ranges due to different market performance among the various asset categories. If it is determined that rebalancing is required, future additions and withdrawals will be used to bring the allocation to the desired level.

Aegon USA maintains minimum required funding levels as set forth by the Internal Revenue Code. If contributions are required, the funding would be provided from the Company’s general account assets. Pension plan contributions were not required for Aegon USA in 2018 or 2017. However, with the Aegon N.V. Management Board approval of a proposal from Transamerica Corporation, Transamerica Corporation made a pension plan contribution of EUR 190 million in September 2018 (EUR 89 million in September 2017) that was over and above the minimum required funding levels as set forth by the Internal Revenue Code.

Aegon USA also sponsors supplemental retirement plans to provide senior management with benefits in excess of normal retirement benefits. The plans are unfunded and are not qualified under the Internal Revenue Code. The supplemental retirement plans are governed by either Transamerica Corporation, or the Compensation Committee of the Board of Directors of Transamerica Corporation. Transamerica Corporation, or the Compensation Committee of the Board of Directors has the full power and discretion to apply all of the plan’s provisions, including such responsibilities as, but not limited to, interpret the plan provisions, to make factual determinations under the plan, to determine plan benefits, and to comply with any statutory reporting and disclosure requirements. The benefits are based on years of service and the employee’s eligible annual compensation. The plans provide benefits based on a traditional final average formula or a cash balance formula (which defines the accrued benefit in terms of a stated account balance), depending on the age and service of the plan participant. The company funds the benefit payments of the supplemental retirement plans from its general account assets. The unfunded amount related to these plans, for which a liability has been recorded, was EUR 241 million (2017: EUR 257 million unfunded).

Aegon USA provides health care benefits to retired employees through continuation of coverage in self funded plans, which are classified as unfunded per IAS 19 financial guidance. The postretirement health care benefits under the Plans are administered by Transamerica Corporation, which has delegated the claims administration to third-party administrators. Aegon USA maintains two plans which provide continuation of coverage for retiree medical benefits. For each plan, Aegon USA has the fiduciary responsibility to administer the plan in accordance with its terms, and decides questions related to eligibility and determines plan provisions and benefit amounts.

Under the Employee Retirement Income Security Act (ERISA), Aegon USA has the fiduciary responsibility to monitor the quality of services provided by the third-party claims administrator and to replace the third-party administrator if needed. In addition, Aegon USA has the fiduciary obligation to interpret the provisions of the plans, and to comply with any statutory reporting and disclosure requirements. Finally, Aegon USA reviews the terms of the plans and makes changes to the plans if and when appropriate. Aegon USA funds the benefit payments of the post-retirement health care plans from its general account assets. The post-retirement health benefit liability amounted to EUR 210 million (2017: EUR 227 million).

The weighted average duration of the defined benefit obligation is 12.2 years (2017: 13.2 years).

The principal actuarial assumptions that apply for the year ended December 31 are as follows:


Actuarial assumptions used to determine defined benefit obligations at year-end	2018	2017

Demographic actuarial assumptions
Mortality	US mortality table¹	US mortality table²

Financial actuarial assumptions
Discount rate³	4.22%/4.05%	3.55%
Salary increase rate	3.85%	3.85%
Health care trend rate	7.00%	7.40%

¹	U.S. Society of Actuaries RP2014 mortality table with Scale MP2018.

²	U.S. Society of Actuaries RP2014 mortality table with Scale MP2017.

³	Aegon USA has separate discount rates beginning with 2018 – 4.22% for all pension plans and 4.05% for post retirement welfare plan.

The principal actuarial assumptions have an effect on the amounts reported for the defined benefit obligation. A change as indicated in the table below in the principal actuarial assumptions would have the following effects on the defined benefit obligation per year-end:


	Estimated approximate effects on the defined benefit obligation
	2018	2017

Demographic actuarial assumptions
10% increase in mortality rates	(70)		(76	)
10% decrease in mortality rates	77		83

Financial actuarial assumptions
100 basis points increase in discount rate	(351)		(402	)
100 basis points decrease in discount rate	430		498
100 basis points increase in salary increase rate	29		38
100 basis points decrease in salary increase rate	(26)		(33	)
100 basis points increase in health care trend rate	12		15
100 basis points decrease in health care trend rate	(11)		(13	)

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the statement of financial position.


		Target allocation of plan assets for retirement benefit plans for the next annual period is:
Equity instruments		19-28%
Debt instruments		47-58%
Other		20-28%

Aegon the Netherlands

Aegon the Nederlands has a number of defined benefit plans and a small number of defined contribution plans. The defined benefit plans are subject to Dutch Pension regulations and governed by the Board of Directors of Aegon the Netherlands. The Board of Directors has the full power and discretion to administer the plan including developing investment policy and managing assets for the plans (although these assets do not qualify as ‘plan assets’ as defined by IFRS), deciding questions related to eligibility and benefit amounts, and any disputes that may arise from plan participants and for complying with the plan provisions, and legal requirements related to the plan and its operation. Aegon the Netherlands runs, in principle, full actuarial and investment risk regarding the defined benefit plans. This includes the risks of low interest rates, low returns and increased longevity. A part of this risk can be attributed to plan participants by lowering indexation or by increasing employee contributions.

Furthermore, the specific statutory requirements governing the administration of group pension schemes have been laid down in the Pension Act (Pensioenwet/Pw). Insurers are subject to prudential supervision pursuant to the Financial Supervision Act (Wet op het financieel toezicht/Wft).

Investment strategies are established based on asset and liability studies. The overall goal is to maximize total investment returns to provide sufficient funding for the present and anticipated future benefit obligations within the constraints of a prudent level of portfolio risk. These studies use for example return objectives and various investment instruments. Investment restrictions are updated regularly and they result in asset allocation mix and hedges.

The contributions to the retirement benefit plan of Aegon the Netherlands are paid by both the employees and the employer, with the employer contribution being variable¹. The benefits covered are retirement benefits, disability, death and survivor pension and are based on an average wage system. The defined benefit plans were unfunded by EUR 2,967 million at December 31, 2018. (2017:

¹	Aegon Nederland deducts employee contributions from the total pension expenses.

EUR 2,628 million). The defined benefit plans are largely backed by investment, although these assets do not qualify as ‘plan assets’ as defined by IFRS. The average remaining duration of the defined benefits obligation is 20.9 years (2017: 19.6 years).

Aegon the Netherlands also has a post-retirement medical plan that contributes to the health care coverage of employees and beneficiaries after retirement. For this plan, Aegon the Nederlands has the responsibility to administer the plan in accordance with its terms, and decides on questions related to eligibility and determines plan provisions and benefit amounts. In addition, Aegon the Nederlands has the obligation to interpret the provisions of the plans, and to comply with any statutory reporting and disclosure requirements. Finally, Aegon the Nederlands reviews the terms of the plans and makes changes to the plans if and when appropriate. The liabilities related to these other post-employment benefit plans are fully unfunded and amount to EUR 65 million at December 31, 2018 (2017: EUR 65 million). The weighted average duration of the other post-employment benefit plans is 11.7 years (2017: 11.9 years).

Plan amendments

As per December 31, 2017 Aegon the Nederlands has accounted for a plan amendment as from January 1, 2018 which concerns the increase of its retirement age of its pension plan from 67 to 68 years. There were no plan amendments during 2018.

The principal actuarial assumptions that apply for the year-ended December 31 are as follows:


Actuarial assumptions used to determine defined benefit obligations at year-end	2018	2017
Demographic actuarial assumptions
Mortality	NL mortality table ¹	NL mortality table ¹

Financial actuarial assumptions
Discount rate	1.74%	2.09%
Salary increase rate ²	Curve 2018	Curve 2017
Indexation ³	57.75% of Curve 2018	44.10% of Curve 2017

¹	Based on prospective mortality table of the Dutch Actuarial Society with minor methodology adjustments.

²	Based on Dutch Consumer Price Index.

³	Based on Dutch Consumer Price Index.

The principal actuarial assumptions have an effect on the amounts reported for the defined benefit obligation. A change as indicated in the table below in the principal actuarial assumptions of the retirement benefit plan would have the following effects per year-end:


	Estimated approximate effects on the defined benefit obligation
	2018		2017
Demographic actuarial assumptions
10% increase in mortality rates	(81	)	(69	)
10% decrease in mortality rates	90		77

Financial actuarial assumptions
100 basis points increase in discount rate	(534	)	(447	)
100 basis points decrease in discount rate	733		605
100 basis points increase in salary increase rate	18		4
100 basis points decrease in salary increase rate	(18	)	(4	)
25 basis points increase in indexation	167		140
25 basis points decrease in indexation	(152	)	(128	)

The above sensitivity analysis is based on a change in one assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit obligation recognized within the statement of financial position.

Aegon UK

Aegon UK operated a defined benefit pension scheme providing benefits for staff based on final pensionable salary and years of service. The scheme closed to new entrants a number of years ago and closed to future accrual on March 31, 2013. Aegon UK now offers a defined contribution pension scheme to all employees.

The pension scheme is administered separately from Aegon UK and is governed by Trustees, who are required to act in the best interests of the pension scheme members.

The pension scheme Trustees are required to carry out triennial valuations on the scheme’s funding position, with the latest valuation being as at March 31, 2016. As part of this triennial valuation process, a schedule of contributions is agreed between the Trustees and Aegon UK in accordance with UK pensions legislation and guidance issued by the Pensions Regulator in the UK. The schedule of contributions includes deficit reduction contributions to clear any scheme deficit. Under IAS 19, the defined benefit plan has a deficit of EUR 51 million at December 31, 2018 (2017: EUR 137 million deficit). During 2018 EUR 55 million (2017: EUR 87 million) of contributions were paid into the scheme. The 2017 contributions included a one off payment of EUR 34 million in addition to the schedule of contributions.

The investment strategy for the scheme is determined by the trustees in consultation with Aegon UK. Currently 30% of assets are invested in growth assets (i.e. primarily equities) and 70% are liability driven investments where the investments are a portfolio of fixed interest and inflation-linked bonds and related derivatives, selected to broadly match the interest rate and inflation profile of liabilities.

Under the scheme rules, pensions in payment increase in line with the UK Retail Price Index, and deferred benefits increase in line with the UK Consumer Price Index. The pension scheme is therefore exposed to UK inflation changes as well as interest rate risks, investment returns and changes in the life expectancy of pensioners.

The weighted average duration of the defined benefit obligation is 21.6 years (2017: 23.1 years).

The principal actuarial assumptions that apply for the year ended December 31 are as follows:


Actuarial assumptions used to determine defined benefit obligations at year-end	2018	2017
Demographic actuarial assumptions
Mortality	UK mortality table ¹	UK mortality table ²

Financial actuarial assumptions
Discount rate	2.94%	2.56%
Price inflation	3.32%	3.29%

¹	Club Vita tables based on analysis of Scheme membership CMI 2017 1.5%/1.25% p.a. (males/females)

²	Club Vita tables based on analysis of Scheme membership CMI 2014 1.5%/1.25% p.a. (males/females)


	Estimated approximate effects on the defined benefit obligation
	2018		2017
Demographic actuarial assumptions
10% increase in mortality rates	(34	)	(44	)
10% decrease in mortality rates	38		50

Financial actuarial assumptions
100 basis points increase in discount rate	(235	)	(299	)
100 basis points decrease in discount rate	313		412
100 basis points increase in price inflation	119		169
100 basis points decrease in price inflation	(192	)	(248	)

All other operating segments

Businesses included in all other operating segments mostly operate defined contribution plans. Please refer to note 14 Commissions and expenses for the employee expenses regarding these contribution plans.

Target allocation of plan assets for retirement
benefit plans for the next annual period is:

Equity instruments

Debt instruments