35 Post-retirement medical aid obligations
  The company and its subsidiaries operate post-employment medical benefit schemes that cover certain of their employees and retirees. This practice has since been stopped for new employees. The liabilities are valued annually using the projected unit credit method. The latest actuarial valuation was performed on 30 September 2015.
  GROUP
(R’million) 2015   2014  
Balance at the end of the year        
Present value of obligations (643,1)   (626,4)  
Liability at reporting date (643,1)   (626,4)  
Movement in the liability recognised in the statement of financial position:        
Balance at the beginning of the year (626,4)   (580,9)  
Contributions paid 38,4   36,2  
Other expenses included in staff costs (55,1)   (81,7)  
Current service cost (3,5)   (2,6)  
Interest cost (51,5)   (50,6)  
Actuarial gains released in terms of IAS 19R (0,1)   (28,5)  
Balance at the end of the year (643,1)   (626,4)  

The employer’s estimate of contributions expected to be paid for the 2016 financial year is R41,0 million (2015: R38,6 million).

  GROUP
% 2015   2014  
The principal actuarial assumptions used for accounting purposes were:        
Discount rate 9,10   8,50  
Medical inflation 8,40   7,80  
Future salary increases 8,40   7,80  
Post-retirement mortality tables PA(90)
ultimate
rated
down
2 years
plus 1%
improvement
pa
from 2006		   PA(90)
ultimate
rated
down
2 years
plus 1%
improvement
pa
from 2006		  

The risks faced by the group as a result of the post-retirement medical aid obligation can be summarised as follows:

  • Inflation: The risk that future CPI inflation and healthcare cost inflation are higher than expected and uncontrolled
  • Longevity: The risk that pensioners live longer than expected
  • Open-ended, long-term liability: The risk that the liability may be volatile in the future and uncert
  • Future changes in legislation: The risk that changes to legislation with respect to the post-employment liability may increase the liability for Tiger Brands
  • Future changes in the tax environment: The risk that changes in the tax legislation governing employee benefits may increase the liability for Tiger Brands
  • Perceived inequality between current employees: The risk of dissatisfaction of current employees who are not eligible for a post-employment healthcare subsidy
  • Administration: Administration of this liability poses a burden to Tiger Brands
  • Enforcement of eligibility criteria and rules: The risk that eligibility criteria and rules are not strictly or consistently enforced.
35.1 Sensitivity analysis
 
GROUP Base case   Medical inflation  
2015          
Key assumption (%) 8,40   (1,0) 1,0  
Accrued liability 30 September 2015          
(R’million) 643,1   578,9 720,4  
% change     (10,0) 12,0  
Current service cost plus interest cost 2015/2016          
(R’million) 60,4   53,8 68,5  
% change     (11,0) 13,4  
2014          
Key assumption (%) 7,80   (1,0) 1,0  
Accrued liability 30 September 2014          
(R’million) 626,4   563,1 702,7  
% change     (10,1) 12,2  
Current service cost plus interest cost 2014/2015          
(R’million) 55,1   49,1 62,3  
% change     (10,8) 13,2  
GROUP Base case   Discount rate  
2015          
Key assumption (%) 9,10%   (1,0%) 1,0%  
Present value of obligations 30 September 2015          
(R’million) 643,1   724,1 576,9  
% change     12,6 (10,3)  
2014          
Key assumption (%) 8,50%   (1,0%) 1,0%  
Present value of obligations 30 September 2014          
(R’million) 626,4   706,6 561,1  
% change     12,8 (10,4)  
GROUP Base case   Expected retirement age  
2015          
Key assumption 60/63/65
years		   1 year
younger		 1 year
older		  
Present value of obligations 30 September 2015          
(R’million) 643,1   647,0 639,7  
% change     0,6 (0,5)  
2014          
Key assumption          
Present value of obligations 30 September 2014          
(R’million) 626,4   630,7 620,9  
% change     0,7 (0,9)  

GROUP
(R’million)
30 Sept
2015		   30 Sept
2014		 30 Sept
2013		 30 Sept
2012		 30 Sept
2011		  
Trend information              
Present value of obligations (643,1)   (626,4) (580,9) (584,4) (544,3)  
Present value of obligations in excess of plan assets (643,1)   (626,4) (580,9) (584,4) (544,3)  
Experience adjustments 0,1   (5,9) (2,2) (9,8) 1,6  
Actuarial (gains)/losses before changes in assumptions:              
In respect of present value of obligations 0,1   (5,9) (2,2) (9,8) 1,6  
The duration of the liability at 30 September 2015 is 12,9 years (2014: 13,0 years)