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Notes to the financial statements
continued
for the year ended 30 September 2015
170
Tiger Brands Limited integrated annual report
2015
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 uncertain
❍❍
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.