www.se.com 378 Schneider Electric Universal Registration Document 2021 Chapter 5 – Consolidated financial statements at December 31, 2021 Note 20: Pensions and other post-employment benefit obligations The Group has set up various post-employment benefit plans for employees covering pensions, termination benefits, healthcare, life insurance and other benefits, as well as long-term benefit plans for active employees. Defined Benefit Pension Plans The Group’s main Defined Benefit pension plans are located in the United Kingdom (UK) and the United States (US). They respectively represent 62% (2020: 64%) and 22% (2020: 21%) of the Group’s total Defined Benefit Obligations (DBO) on pensions. The majority of benefit obligations under these plans, which represent 93% of the Group’s total commitment at December 31, 2021, are partially or fully funded through payments to external funds. These funds are never invested in Group assets. United Kingdom The Group companies operate several Defined Benefit pension plans in the UK. The main one is related to the Invensys Pension Scheme. Pensions payable to employees depend on average final salary and length of service within the Group. These plans are registered schemes under UK tax law and managed by independent Boards of Trustees. They are closed to new entrants, and for most of them, the vested rights were frozen as they have been replaced by Defined Contributions plans. These plans are funded by employer contributions, which are negotiated every three years based on plan valuations carried out by independent actuaries, so that the long-term financing services are ensured. In relation to risk management and asset allocation, the Board of Trustees’ aims of each plan are to ensure that it can meet its obligations to the plan’s beneficiaries both in the short and long-term. The Board of Trustees is responsible for the plan’s long-term investment strategy and defines and manages long-term investment strategies to reduce risks, including interest rate risks and longevity risks. A certain proportion of assets hedges the liability valuation change resulting from the interest rates evolution. Those assets are primarily invested in fixed income investments, particularly intermediate and longer-term instruments. Following the agreement reached with the Trustee of the Invensys Pension Scheme on February 2014, Schneider Electric SE guaranteed all obligations of the Invensys subsidiaries which participate in the scheme, up to a maximum amount of GBP 1.75 billion. As of December 31, 2021, plan assets exceed the value of obligations subject to this guarantee and thus this guarantee cannot be called. Schneider UK pension plans contain provisions of pension called Guaranteed Minimum Pension (“GMP”). GMPs were accrued for individuals who subscribed to the State Second Pension prior to April 6, 1997. Historically, there was an inequality in the benefits between male and female members concerning GMP. A High Court case concluded on October 26, 2018, confirmed that all UK pension plans must equalize “GMPs” between men and women. In the light of these events and new information, the Group updated the related assumptions, leading to a net experience adjustment in “Other Comprehensive Income” of EUR 56 million. Following a further High Court ruling in November 2020, an additional net experience adjustment of EUR 7 million was recognized in other comprehensive income in 2020. United States The United States’ subsidiaries operate several Defined Benefit pension plans. These plans are closed to new entrants, frozen to future accruals and have been replaced by Defined Contributions plans. Pensions payable to employees depend on the average final salary and the length of service within the Group. Each year, the Group companies contribute a certain amount to the Defined Benefit pension plans. This amount is determined actuarially and is comprised of service costs, administrative expenses and payments toward any existing deficits. Since the plans are closed and frozen, there is generally no service cost component. The companies delegate various responsibilities to Pension Committees. These committees define and manage long-term investment strategies to reduce risks, including interest rate risks and longevity risks. A certain proportion of assets hedges the liability valuation change, resulting from the interest rates evolution. Those assets are primarily invested in fixed income investments, particularly intermediate and longer-term instruments. 5.5 Notes to the consolidated financial statements