189 ANNUAL REPORT 2010 2010 2009 Assumptions used to determine benefit obligations at year-end: Discount rate 5.25% 6.00% Rate of increase in compensation levels 4.59% 4.59% Assumptions used to determine net periodic benefit cost for the year ended December 31: Discount rate 6.00% 6.50% Rates of increase in compensation levels 4.59% 4.56% Expected long-term rate of return on assets 7.65% 8.10% The expected return on plan assets is set at the long-term rate  expected to be earned based on the long-term investment  strategy and the various classes of the invested funds. For each  asset class, a long-term asset return assumption is developed  taking into account the long-term level of risk of the asset and  historical returns of the asset class. A weighted average expected  long-term rate was developed based on long-term returns for  each asset class and the target asset allocation of the plan. AEGON USA provides health care benefits to retired employees,  which are predominantly unfunded. The post-retirement health  benefit liability amounts to EUR 185 million (2009:  EUR 165 million). The principal actuarial assumptions that apply for the year  ended December 31, 2010 are as follows: 2010 2009 Assumed health care trend rates: Health care cost trend rate assumed for next year 7.50% 8.00% Rate that the cost trend rate gradually declines to 5.00% 5.00% Year that the rate reaches the rate that it is assumed to remain at 2020 2013 Target allocation of plan assets for retirement benefit plans for the next annual period is: Equity instruments 53 – 73% 53 – 73% Debt instruments 15 – 35% 15 – 35% Other 0 – 15% 0 – 15% The overall goal of the plans 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 plans. 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. Pension plan contributions were not required for AEGON USA in  2010 or 2009. AEGON The Netherlands has a number of defined benefit plans  and a small defined contribution plan. 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 variable. The benefits covered are retirement  benefits, disability, death and survivor pension and are based  on an average salary system. Employees earning more than  EUR 45,296 per year (as at January 1, 2010) have an option to  contribute to a defined contribution plan for the excess salary.  However, the cost for the company remains the same. The  defined benefit plans were unfunded by EUR 1,756 million  at December 31, 2010 (2009: EUR 1,631 million). Assets held by  AEGON The Netherlands for retirement benefits 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  do not form part of the calculation of defined benefit expenses.  SHARPENING OUR FOCUS AEGON THE NETHERLANDS 