Notes to the Group financial statements
for the year ended 30 June
R million | 2014 | 2013 | ||||
15. | RETIREMENT BENEFIT INFORMATION | |||||
Valuation in terms of the Financial Services Board (FSB) guidelines | ||||||
A valuation of the defined benefit fund was carried out on 1 July 2013 by an independent firm of consulting actuaries and was approved by the FSB in August 2014. The fund was found to have a surplus of R377 million, of which R144 million has been designated as a solvency reserve by the trustees in terms of circular PF 117 issued by the Financial Services Board (FSB). Any allocation of assets to contingency reserves reduces the amount of surplus available for distribution to former members and other stakeholders. The Group carries out statutory actuarial valuations every three years. | ||||||
Present value of funded obligations | (338) | (278) | ||||
Fair value of fund assets | 715 | 503 | ||||
Surplus before contingency reserve | 377 | 225 | ||||
Contingency reserve | (144) | (80) | ||||
Employer surplus account | (35) | (22) | ||||
Surplus | 198 | 123 | ||||
IAS 19R valuation | ||||||
The surplus calculated in terms of IAS 19R: Employee Benefits is presented below. It should be noted that this valuation is performed on a different basis to the valuation in terms of the FSB guidelines. | ||||||
The amount recognised in the statement of financial position is determined as follows: | ||||||
Present value of funded obligations | (391) | (317) | ||||
Balance at beginning of year | (317) | (321) | ||||
Current service cost | (4) | (6) | ||||
Interest cost | (27) | (26) | ||||
Contributions by plan participants | (1) | (1) | ||||
Actuarial (loss)/gain | (26) | 25 | ||||
Benefits paid | 39 | 12 | ||||
Transfers of reinsured pensioner liability | (55) | – | ||||
Fair value of plan assets | 875 | 677 | ||||
Balance at beginning of year | 677 | 545 | ||||
Expected return on plan assets | 59 | 44 | ||||
Actuarial gain | 122 | 99 | ||||
Contributions by plan participants | 1 | 1 | ||||
Benefits paid | (39) | (12) | ||||
Transfers of reinsured pensioner liability | 55 | – | ||||
Present value of retirement benefit surplus | 484 | 360 | ||||
Less: application of asset ceiling | (439) | (331) | ||||
Balance at beginning of year | (331) | (186) | ||||
Interest income | (30) | (15) | ||||
Adjustment to asset ceiling | (78) | (130) | ||||
Pension fund asset | 45 | 29 | ||||
The expected return on assets is calculated using the discount rate at the start of the period of 9% per annum rather than a “best estimate” return assumption based on actual assets in which the Fund invested. In applying the asset ceiling the present value of the retirement benefit surplus that may be recognised as an asset is limited to the lower of the amount as determined above or the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan plus any cumulative unrecognised net actuarial losses and past service costs. The present value of the retirement surplus of the fund for the current and prior years is as follows: |
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R million | 2014 | 2013 | 2012 | 2011 | 2010 | |
Present value of funded obligations | (391) | (317) | (321) | (290) | (249) | |
Fair value of plan assets | 875 | 677 | 545 | 501 | 454 | |
Surplus | 484 | 360 | 224 | 211 | 205 | |
Experience adjustment on plan obligations | 7% | (8%) | 6% | 10% | (1%) | |
Experience adjustment on plan assets | 14% | 15% | 3% | 4% | 7% | |
R million | 2014 | 2013 | |
The amounts recognised in profit or loss for the year are as follows (refer to note 3): | |||
Current service cost | 4 | 6 | |
Interest cost | (2) | (3) | |
2 | 3 | ||
The amounts recognised in other comprehensive income are as follows: | |||
Net actuarial gain | (96) | (124) | |
Effect of asset ceiling | 78 | 130 | |
(Surplus)/deficit | (18) | 6 | |
Net movement in total comprehensive income for the year | (16) | 9 | |
A 1% increase in the future rate increase of the pension fund liability assumption from 9.45% per annum to 10.45% per annum results in the liability decreasing by R46.4 million, or 11.9% and the resultant decrease in the total of the service and interest costs on the defined benefit obligation is R1.9 million, or 4.7%. A 1% decrease in the future rate of increase of the pension fund liability assumption from 9.45% per annum to 8.45% per annum results in the liability increasing by R57.7 million, or 14.8% and the resultant increase in the total of the service and interest costs on the defined benefit obligation is R2.2 million, or 5.3%. The principal actuarial assumptions used were as follows: |
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Discount rate | 9.45% | 9.00% | |
Inflation rate | 6.60% | 6.00% | |
Expected return on plan assets | 9.45% | 9.00% | |
Future salary increases | 8.10% | 7.50% | |
Future pension increases |
6.60% | 6.00% | |
The average life expectancy in years of an employee retiring at age 60 at 30 June 2014 and of a member retiring at age 60, 20 years after the statement of financial position date are as follows: |
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Male |
19.4 | 19.4 | |
Female | 24.2 | 24.2 | |
Mortality rates are assumed to be in accordance with the following standard tables: |
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Before retirement: | |||
SA1985-90 Ultimate table for males and females | |||
After retirement: | |||
PA 90 rated down 2 years for males and females | |||
Plan assets comprise: | |||
Listed equity investments | 74% | 76% | |
Bonds and cash | 25% | 19% | |
Other | 1% | 5% | |
Pension plan assets include the Company's ordinary shares with a fair value of R3.6 million (2013: R3.5 million). The expected return on plan assets has been set equal to the discount rate used to value the defined benefit obligations of the fund. The fund has an amount of R35 million allocated to the employee surplus account that is currently being utilised towards a contribution holiday, which is expected to last for at least 1 year. |