UPM Annual Report 2024

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WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Report of the Board of Directors

Sustainability Statement

Financial Statements

Auditor's Report

Sustainability Assurance Reports

3.4 Retirement benefit obligations The group operates various pension schemes in accordance with local conditions and practices in the countries of operations. Retirement benefits are employee benefits that are payable usually after the termination of employment, such as pensions and post-employment medical care.

Present value of obligation and fair value of plan assets

The pension plans are generally funded through payments to insurance companies or to trustee-administered funds or foundations and classified as defined contribution plans or defined benefit plans. Defined benefit assets and liabilities recognised in the balance sheet are presented below:

Pension and other post-employment benefits 2024

Pension and other post-employment benefits 2023

NET DEFINED BENEFIT LIABILITY/ (ASSET)

PRESENT VALUE OF OBLIGATION

FAIR VALUE OF PLAN ASSETS

PRESENT VALUE OF OBLIGATION

FAIR VALUE OF PLAN ASSETS

EURm

Carrying value, at 1 January

810

-327

484

850

-340

510

2024

2023

OTHER COUN TRIES TOTAL FINLAND UK GERMANY

OTHER COUN

Current service cost

— — —

Past service cost

—

-1

EURm

FINLAND

UK GERMANY

TRIES TOTAL

Gains and losses arising from settlements

-1

—

Present value of funded obligations

14 -15

305 -275

—

321 -293

26 -26

320 -297

377 -327

Interest expense (+) income (–)

30 33

-14 -14

16 19

32 36

-15 -15

17 21

Fair value of plan assets Deficit (+)/surplus (–)

-2 -2

-2

Total included in employee costs (Note 3.1)

—

431

446

—

417

434

Present value of unfunded obligations Net defined benefit liability (+)/ asset (–) Net retirement benefit asset in the balance sheet Net retirement benefit liability in the balance sheet 1)

Actuarial gains and losses arising from changes in demographic assumptions Actuarial gains and losses arising from changes in financial assumptions Actuarial gains and losses arising from experience adjustments Return on plan assets, excluding amounts included in interest expense (+) income (–) Total remeasurement gains (–) and losses (+) included in other comprehensive income

429

474

445

484

-1

—

-1

-13

—

-13

-1

—

-1

—

-1

-28

—

-28

—

429

475

445

485

-12

—

-12

—

1) Net retirement benefit liability in the balance sheet includes other long-term employee benefits of EUR 22 million (17 million) in 2024.

—

UK In the UK, the group operates a legacy defined benefit scheme providing benefits that are linked to the salary level near retirement age or an earlier date of leaving service. The scheme is closed both for new members and future accrual for old members. Part of the scheme is a defined contribution plan and is open to all current employees. The UK pension scheme operates under a single trust which is independent from

UPM's most significant defined benefit arrangements are in the UK and in Germany. The group has defined benefit obligations also in Finland, the Netherlands, France, Canada and in the US. In 2024, one defined benefit plan in Finland was fully settled reducing both plan assets (EUR 10.4 million in 2023) and obligations (EUR 9.7 million in 2023) to EUR 0 million. In 2023, net retirement benefit liability of EUR 36 million of UPM-Kymmene Austria GmbH was presented in liabilities related to assets held for sale, and consisted of unfunded obligations. Finland In Finland, employers are obliged to insure their employees for statutory benefits, as determined in Employee’s Pension Act (TyEL). TyEL provides the employee with insurance protection for old age, disability and death. The group's Finnish employees are mainly insured with an insurance company and these arrangements qualify as defined contributions plans.

-41

-7

Benefits paid

-52

— —

-44

— —

Settlements paid

— —

—

-9

Contributions by the employer

-24 -15

-24

—

-25

Translation differences

-6

—

the group. Germany

Liabilities classified as held for sale (Note 8.4)

—

-36

—

-36

Carrying value, at 31 December

767

-293

474

810

-327

484

In Germany, employees within defined benefit arrangements are entitled to annual pensions on retirement based on their service and final salary. All significant defined benefit plans are closed for new employees.

Actuarial risks

Defined benefit plans typically expose the group to the following actuarial risks: Investment risk (asset volatility) The group is exposed to changes of assets’ values especially in the UK. The asset values of UK arrangements constitute 94% of total asset values in defined benefit plans within group. Interest risk Discount rates used in calculations are based on high-quality corporate bond yield curves in currency in which the benefits are paid. A decrease in the discount rate would increase the plan liabilities. The maturities of yields are reflecting the durations of the underlying obligations. The weighted average duration of group’s defined benefit obligation is 13 years (14 years) at the end of 2024. Inflation risk In the UK, the pensions in payment are tied to Retail Price Index whilst being tied to Consumer Price Index during deferment. An increase of 0.5% in indexes will increase the liabilities by approximately EUR 11

million. In Germany the pensions have to be adjusted in accordance with the Consumer Price Index. Salary risk The present value of the net retirement benefit assets and liabilities is calculated by reference to the expected future salaries of plan participants. An increase in the salary of the plan participants would increase the plan liabilities. In the UK, the changes in salary levels have no impact on the funding position as all defined benefit arrangements in the UK are closed to future accrual. In Germany, an increase of 0.5% in expected future salaries would increase the obligation by EUR 5 million. Life expectancy Adjustments in mortality assumption have an impact on group’s defined benefit obligation. An increase in life expectancy by one year will increase the obligation in the UK by EUR 11 million and in Germany by EUR 16 million.