Annexure C: Defined benefit plan
Defined contribution plan
The Company and its subsidiaries contribute to a defined contribution plan for all employees in South Africa.
These contributions are expensed.
Contributions to the defined contribution plan expected in the following year are R98.2 million (2015: R81.1million).
Defined benefit plan
In addition, the Company and its subsidiaries contribute to a retirement benefit fund in respect of certain retirees. The assets of the funds are held in independent trustee administered funds, administered in terms of the Pension Funds Act No 24 of 1956, as amended. Funds must, in terms of the Pension Fund Act, be valued at least every three years. The last full actuarial valuation was done on 30 September 2013.
For purposes of production of these disclosures, and in order to comply with the requirements of IAS 19, valuations have been performed by independent actuaries, using the Projected Credit Unit method. Where valuations were not possible due to the limited availability of complete data, roll forward projections of prior completed actuarial valuations were used, taking account of actual subsequent experience. The timing of benefit payments are uncertain.
The disclosure of the funded status is for accounting purposes only, and does not necessarily indicate any assets available to the Group.
| 2016 R’000 |
2015 R’000 |
|||
| Net benefit expense | ||||
| Interest cost on defined benefit obligation | 104 | 129 | ||
|---|---|---|---|---|
| Interest income on assets | (136) | (876) | ||
| Effect of paragraph 64 | 32 | 747 | ||
| Net benefit expense | – | – | ||
| Benefit liability | ||||
| Defined benefit obligation | (1 168) | (1 318) | ||
| Fair value of plan assets | 1 710 | 1 701 | ||
| 542 | 383 | |||
| Unrecognised due to Paragraph 64 limit | (542) | (383) | ||
| – | – | |||
| Changes in the present value of the defined benefit obligation are as follows: | ||||
| Defined benefit obligation at 1 July | (1 318) | (1 523) | ||
| Interest cost | (104) | (129) | ||
| Benefits paid | 123 | 46 | ||
| Actuarial gains on obligation | 131 | 288 | ||
| Defined benefit obligation at 30 June | (1 168) | (1 318) | ||
| Changes in the fair value of the defined benefit plan assets are as follows: | ||||
| Fair value of plan assets at 1 July | 1 701 | 10 206 | ||
| Return | 136 | 876 | ||
| Benefits paid | (123) | (46) | ||
| Actuarial loss* | (4) | (9 335) | ||
| Fair value of plan assets at 30 June | 1 710 | 1 701 | ||
| Asset coverage over liabilities (times) | 1.5 | 1.3 |
| * | The resulting difference in the prior year in the market value of assets has been noted as an actuarial loss on the assets and is mostly as a result of the allocation of surplus to the defined contribution members of the Fund in terms of the Fund’s bonus distribution policy, adopted by the Trustees. |
| Assumptions | % | % | ||
| The assumptions used in the valuations are as follows: | ||||
| Discount rate | 9.70 | 8.30 | ||
| Future pension increases | 7.40 | 6.20 | ||
| Estimated asset composition | ||||
| Cash | 74.44 | 59.75 | ||
| Bonds | 25.56 | 40.25 |
| Sensitivity analysis | Valuation R’000 |
+1% R’000 |
-1% R’000 |
|
| The liability was recalculated to show the effect of: | ||||
| 2016 | ||||
| A one percentage point increase variance in the discount rate assumption | (1 168) | (1 094) | (1 255) | |
| A one percentage point variance in the pension increase rate | (1 168) | (1 256) | (1 091) | |
| 2015 | ||||
| A one percentage point increase variance in the discount rate assumption | (1 318) | (1 236) | (1 414) | |
| A one percentage point variance in the pension increase rate | (1 318) | (1 415) | (1 234) |