Notes to the consolidated financial statements

for the year ended 30 June 2009

32. RETIREMENT BENEFIT INFORMATION

Pensions

Assmang pension and provident funds
Assmang has made provision for pension plans covering all employees which comprise a defined contribution pension fund and two defined contribution provident funds administered by employee organisations within the industries in which members are employed.

Reviews of the plans are carried out by independent actuaries at regular intervals. Contributions to the funds are 15,0% of payroll, split on an agreed basis between members and the employer.

The amount expensed in the current year was R28,2 million (2008: R20,2 million).

Defined benefit fund – Assore Pension Fund
In terms of the Pension Funds Act, the Assore Pension Fund is actuarially valued every three years.The most recent statutory actuarial valuation of the fund was performed as at 1 July 2005 and revealed a 93,2% funding level.The actuarial valuation for 1 July 2008 is being finalised, and will be released upon the completion of the audit as required by the Pension Funds Act. An interim funding check was performed for funding purposes as at 30 June 2009 which revealed a 89,2% funding level (2008: 104,5%). Since 1 July 2009, the funded level of the fund has improved to over 95%.The financial positions at the various dates are set out below:

The valuation at year-end for financial reporting purposes revealed the following:

	2009	2008
	R’000	R’000
Plan assets	222 851	234 495
Defined benefit obligation	249 886	224 319
(Shortfall)/surplus	(27 035)	10 176

The shortfall at year-end was offset by unrecognised actuarial losses. No asset has been recognised on the balance sheet (2008: No asset recognised).

Contributions to the fund by the group during the year amounted to R12,2 million (2008: R10,0 million)

The principal actuarial assumptions for the valuations include:

	2009	2008
	%	%
– Pre-retirement discount rate	9,40	10,90
– Price inflation rate	6,58	8,70
– Salary inflation rate	7,70	9,60
– Pension increases	4,94	6,52
– Post-retirement interest rate	4,40	4,40

Other assumptions
– Active mortality
– Nil.
– Pensioner mortality PA (90)
– Ultimate table, adjusted for two years’ additional longevity since the previous year-end.
– Merit salary increases as per sliding scale depending on age starting at 5% per annum below age 25, and reducing to zero above age 50. – Spouse’s benefits for active members – on average, husbands are assumed to be two years older than their wives, and married at date of retirement.
– For current pensioners, their actual marital status and, where applicable, the exact age of their spouse has been taken into account.

32.2

Medical aid

Subsidiary companies

Subsidiary companies within the group had obligations to fund the medical aid costs of certain employees and pensioners. Agreement has been reached with the pensioners and applicable members of staff in terms of which these obligations have been converted to either purchased annuities or a series of lump sum payments into the defined benefit pension fund on their behalf. The payments or premiums concerned were calculated by an independent actuary and have resulted in the liabilities arising from these obligations being settled.

Medical aid contributions paid on behalf of current members of staff and pensioners by subsidiary companies amounted to R3,4 million (2008: R3,0 million).

Joint-venture entity
The joint-venture entity, Assmang, has obligations to fund a portion of certain retiring employees’ medical aid contributions based on the cost of benefits. The anticipated liabilities arising from these obligations have been actuarially determined using the projected unit credit method and a corresponding liability has been raised.

The following table summarises the components of the net benefit expense recognised in the income statement of the joint-venture entity:

	2009	2008
	R’000	R’000
Current service cost	737	651
Interest cost on benefit obligation	1 638	1 429
Benefits	(664)	(595)
Net actuarial loss recognised during the year	1 064	867
Net benefit movement for the year	2 775	2 352

The liability is assessed periodically by an independent actuarial survey based on the following principal actuarial assumptions:
– A net discount rate of 1,00% per annum (2008: 1,00%).
– An increase in healthcare costs at a rate of 7,90% per annum (2008: 7,90%).
– Assumed rate of return on assets at 9,00% per annum (2008: 9,00%).

The liabilities raised are based on the present values of the post-retirement benefits and have been recognised in full. The most recent actuarial valuation was conducted on 30 June 2007.

The provisions raised in respect of post-retirement healthcare benefits amounted to R21,3 million (2008: R18,5 million) at the end of the year. Of this amount R2,8 million (2008: R2,4 million) was charged against income in the current year.

Medical aid contributions paid on behalf of current members of staff and pensioners by the joint-venture entity during the year amounted to R40,1 million (2008: R29,7 million).