34 Pension obligations
  The company and its subsidiaries contribute to retirement plans that cover all employees. The retirement plans are either defined benefit plans or defined contribution plans and are funded. The assets of the funds are held in independent trustee administered funds, administered in terms of the Pension Funds Act 24 of 1956, as amended. In terms of the Pension Funds Act, certain of the retirement funds are exempt from actuarial valuation. Those funds not exempt from valuation must, in terms of the Pension Funds Act, be valued at least every three years. For purposes of these disclosures, and in order to comply with the requirements of IAS 19, valuations have been performed by independent actuaries, using the projected unit credit 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.

Within the company’s group of subsidiaries, there are a total of 22 retirement plans, three of which are defined benefit pension funds, five are defined contribution pension funds, two are defined benefit provident funds and eight are defined contribution provident funds. There are a further four schemes of insurance into which the company and its subsidiaries contribute. Certain companies within the group sponsor external death, funeral and disability benefit insurance policies. These insurance costs have been allowed for in the disclosures provided. All of the funds above are funded with one exception.

The actual return on plan assets for the period 1 October 2014 to 30 September 2015 was R32,1 million (2014: R31,6 million). This compares with the expected return for the same period of R33,9 million (2014: R39,6 million).

The value of contributions expected to be paid by group companies for the year ending 30 September 2016 amounts to R240,4 million (2015 actual: R228,1 million).

As at 30 September 2015, there were no properties occupied by, or other assets used by, group companies which formed part of the fair value of plan assets (2014: Rnil).

As at 30 September 2015, the percentage of the fair value of plan assets in respect of defined benefit arrangements invested in Tiger Brands Limited shares amounted to 0% (2014: 0%).

Major categories of plan assets in respect of defined benefit arrangements as at 30 September:

  GROUP
% 2015   2014  
Equities 4,0   5,6  
Bonds 38,4   32,8  
Cash 53,4   57,3  
Property 0,7   0,7  
International 3,0   3,1  
Other 0,5   0,5  
  100,0   100,0  
Balance at the end of the year        
Present value of defined benefit obligations (305,7)   (319,2)  
Fair value of plan assets in respect of defined benefit obligations 425,6   423,0  
Funded status of defined benefit plans 119,9   103,8  
Unrecognised due to paragraph 64 limit (21,4)   –  
Asset at reporting date 98,5   103,8  

The disclosure of the funded status is for accounting purposes only, and does not necessarily indicate any assets available to the company or its subsidiaries. Once a surplus apportionment exercise is completed, and approved by the Registrar of Pension Funds in terms of the provisions of the Pension Funds Second Amendment Act, 2001, only at that stage would it be appropriate for the company or its subsidiaries to recognise any assets in respect of the retirement funds, to the extent that they are apportioned such assets. The surplus apportionment schemes for the Tiger Brands Defined Benefit Pension Fund and the Beacon Products Staff Pension Fund were approved by the Registrar in 2008. The surplus apportionment scheme for the ICS Pension Fund was approved in 2011. Where appropriate, surplus apportioned to the company has been recognised on the statement of financial position. This legislation is not applicable to arrangements not registered in terms of the Pension Funds Act, such as special purpose entities established for purposes of providing disability benefits.

  GROUP
(R’million) 2015   2014  
Movement in the net asset/(liability) recognised in the statement of financial position        
Balance at the beginning of the year 103,8   108,5  
Contributions paid 228,1   201,3  
Other movements (net expense in the income statement) (218,9)   (193,6)  
Interest cost (26,2)   (29,4)  
Current service cost (227,7)   (203,8)  
Interest on plan assets 33,9   39,6  
Settlement cost 1,1   –  
Remeasurements recognised in other comprehensive income (14,5)   (12,4)  
Net actuarial gains/(losses) released in terms of IAS 19R 6,9   (12,4)  
Unrecognised due to paragraph 64 limit (21,4)   –  
Balance at the end of the year 98,5   103,8  
The net asset is included in the statement of financial position as follows:        
Investments (refer note 17) 47,0   44,8  
Other receivables (refer note 21.1) 54,2   63,0  
Other payables (refer note 29) (2,7)   (4,0)  
  98,5   103,8  
Actuarial assumptions        
The principal actuarial assumptions used for accounting purposes were:        
Discount rate        
Tiger Brands Defined Benefit Pension Fund %
Full yield
curve		   %
Full yield
curve		  
– Tiger Oats Benefit Foundation 6,90   6,70  
– Nestlé Pension Fund 9,70   9,30  
– ICS Pension Fund 6,90   6,70  
Future salary increases 8,20   7,90  
Post-retirement discount rate        
– Tiger Brands Defined Benefit Pension Fund 3,00   3,00  
– Nestlé Pension Fund 3,73   3,58  
Future pension increases        
– Nestlé Pension Fund 5,76   5,52  
(R’million)        
Reconciliation of the defined benefit obligation:        
Defined benefit obligation at the beginning of the year (319,2)   (319,5)  
Current service cost (3,6)   (4,7)  
Member contributions (1,0)   (1,3)  
Interest cost (26,2)   (29,3)  
Actuarial gain/(loss) 8,8   (5,4)  
Benefits paid 29,1   40,7  
Settlement cost 6,1   –  
Risk premiums (group life and permanent health) 0,3   0,3  
Defined benefit obligation at the end of the year (305,7)   (319,2)  
Reconciliation of fair value of plan assets        
Assets at fair market value at the beginning of the year 423,0   428,9  
Interest on plan assets 33,9   39,6  
Contributions 2,8   3,5  
Risk premiums (group life and permanent health) (0,3)   (0,3)  
Benefits paid (26,9)   (40,7)  
Settlement cost (5,0)   –  
Actuarial loss (1,9)   (8,0)  
Assets at fair market value at the end of the year 425,6   423,0  
Reconciliation of asset ceiling        
Asset ceiling at the beginning of the year –   –  
Unrecognised due to paragraph 64 limit (21,4)   –  
Asset ceiling at the end of the year (21,4)   –  
Asset balance at the end of the year 98,5   103,8  

GROUP
(R’million)
30 Sept
2015		   30 Sept
2014		 30 Sept
2013		 30 Sept
2012		 30 Sept
2011		  
Trend information              
Present value of defined benefit obligation (305,7)   (319,2) (319,5) (350,8) (329,5)  
Fair value of plan assets 425,6   423,0 428,9 428,0 398,9  
Funded status 98,5   103,8 109,4 77,2 69,4  
Experience (gain)/loss on liabilities (8,5)   1,4 (14,2) 1,7 51,4  
Experience loss/(gain) on assets 1,9   8,0 (7,7) (14,9) (0,6)  

The risks faced by the group as a result of pension obligations can be summarised as follows:

  • Inflation: The risk that future CPI inflation is higher than expected and uncontrolled
  • Longevity: The risk that pensioners live longer than expected and thus their pension benefit is payable for longer than expected
  • Open-ended, long-term liability: The risk that the liability may be volatile in the future and uncertain
  • Future changes in legislation: The risk that changes to legislation with respect to the post-employment liability may increase the liability for the company
  • Future changes in the tax environment: The risk that changes in the tax legislation governing employee benefits may increase the liability for the company
  • Administration: Administration of this liability poses a burden to the company.
Sensitivity analysis

The sensitivity analysis has been prepared for the Tiger Brands Defined Benefit Pension Fund and the Nestlé Pension Fund. The liabilities of the Tiger Brands PRDBS Provident Fund and the ICS Pension Fund are not sensitive to changes in either the discount rate or the inflation rate.
 
GROUP
 
Balance
2015		   +1% –1%  
  Discount rate          
  Defined benefit obligation (R’million) (256,5)   (250,2) (263,6)  
  Change (%)     (2,5) 2,8  
  Inflation rate          
  Defined benefit obligation (R’million) (256,5)   (263,2) (250,4)  
  Change (%)     2,6 (2,4)