INTEGRATED ANNUAL
REPORT 2020

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Notes to the consolidated financial statements

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33.

POST-EMPLOYMENT BENEFITS

Pension fund

The group operates two pension funds: The Tsogo Sun Group Pension Fund and the Southern Sun Group Retirement Fund. Both are defined contribution funds, governed by the Pension Funds Act, 1956, which provides retirement and death benefits for all permanent, full time employees who are not members of any other approved pension or provident fund.

Provident funds

The group also operates the Alexander Forbes Retirement Fund which is a defined contribution fund, governed by the Pension Funds Act, 1956, which provides retirement and death benefits for all permanent, full time employees who are not members of any other approved pension or provident fund.

Medical aid

The group operates a closed fund defined benefit plan for a portion of the medical aid members. The assets of the funded plans are held independently of the group’s assets. This fund is valued by independent actuaries every year using the projected unit credit method.

The movement in the defined benefit obligation is as follows:

Present
value of
obligation
Rm		 Fair
value of
plan assets
Rm		 Total
Rm
Year ended 31 March 2020
At 1 April 2019 31 (32) (1)
Other post-retirement benefits – medical aid – – –
Expected return on plan assets – (3) (3)
Expected benefit payments from plan assets (3) 3 –
Interest expense/(income) 3 – 3
Remeasurement through OCI (2) (1) (3)
Gain from change in financial assumptions (2) – (2)
Gains from experience adjustments – – –
Return on plan assets – (1) (1)
At 31 March 2020 29 (33) (4)
Year ended 31 March 2019
At 1 April 2018 32 (31) 1
Other post-retirement benefits – medical aid – – –
Expected return on plan assets – (3) (3)
Expected benefit payments from plan assets (3) 3 –
Interest expense/(income) 3 – 3
Remeasurement through OCI (1) (1) (2)
Gain from change in financial assumptions (1) –
Return on plan assets – (1) (1)
At 31 March 2019 31 (32) (1)

The present value of the obligation is R29 million (2019: R31 million) and the present value of the plan assets is R33 million (2019: R32 million).

The principal actuarial assumptions used for the valuation were:

2020
%		 2019
%
Discount rate 9.90 9.70
Healthcare cost inflation 7.30 7.90
Expected return on plan assets 9.90 9.70
Remuneration inflation 6.80 7.40

The fund is actively managed and returns are based on both the expected performance of the asset class and the performance of the fund managers. The assets of the medical aid scheme comprise cash for 2020 and 2019.

The expected long-term rate of return on medical aid assets of 9.90% (2019: 9.70%) is determined by using a standard 0% margin on the assumed rate of discount as per the revised IAS 19 Employee Benefits. The discount rate of 9.90% (2019: 9.70%) per annum is based on current bond yields of appropriate term gross of tax as required by IAS 19. South Africa does not have a deep market in high quality corporate bonds. The discount rate is therefore determined by reference to current market yields on government bonds.

No contributions are expected to be paid into the group’s defined scheme during the annual period after 31 March 2020 (2019: Rnil).

At 31 March the effects of a 1% movement in the assumed medical cost trend rate would be as follows:

2020
Rm		 2019
Rm
Upward movement
Effect on the current service cost and interest cost * *
Effect on the post-retirement medical aid liability (2) (3)
Downward movement
Effect on the current service cost and interest cost * *
Effect on the post-retirement medical aid liability 2 2

* Amount less than R1 million.

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