Notes to the annual financial statementsPick n Pay Stores Limited |
| 23. | Retirement benefits | ||||||||||||||
| The Group has four retirement schemes, covering: | |||||||||||||||
| Score Supermarkets Trading (Pty) Limited | |||||||||||||||
| Boxer Superstores (Pty) Limited | |||||||||||||||
| InterFrank Group Holdings Pty Limited | |||||||||||||||
| Pick n Pay Retailers (Pty) Limited | |||||||||||||||
| 23.1 | Score Supermarkets Trading (Pty) Limited | ||||||||||||||
| Score Supermarkets has its own defined-contribution provident funds, one for Botswana employees and the South African fund for all other employees. Employees who are union members have the choice to join the SACCAWU National Provident Fund. | |||||||||||||||
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The Score provident funds are administered by Alexander Forbes Consultants and Actuaries, who also provide consulting and actuarial services. All the Score South African fund assets are managed by Investment Solutions and the Botswana assets by Investec Asset Management (Botswana). |
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| All funds are defined-contribution funds. | |||||||||||||||
| All Score stores have been sold or converted into Pick n Pay franchise stores and members of the Score fund have been transferred into the appropriate fund of their new employer. The only members remaining on the fund are pensioners. | |||||||||||||||
| 23.2 | Boxer Superstores (Pty) Limited | ||||||||||||||
| Employees of Boxer are members of their own provident funds. | |||||||||||||||
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| This is the main Boxer retirement plan and is a defined-contribution contributory provident fund. There are eight Trustees and two alternate Trustees. Members elect half the Trustees, with the Company appointing the other half. Trustee meetings are held quarterly. Benefits from the fund include Group Life and Disability cover. On 23 June 2009, the Fund was advised that it had fulfilled all the requirements of section 15B (9) of the Pension Funds Act of 1956, with regard to the apportionment of its surplus as at 30 June 2009. | |||||||||||||||
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| This is a defined-contribution contributory provident fund. Union members may elect to join this fund on commencement of employment at Boxer. The Company does not play any role in the running or administration of this fund, or the election of Trustees. | |||||||||||||||
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| This is a defined-contribution contributory provident fund for senior management of the Company. This is an umbrella fund with independently appointed Trustees. An internal advisory committee made up of two members elected and two Company- appointed participants deal with matters pertaining to the Boxer members. | |||||||||||||||
| 23.3 | InterFrank Group Holdings Pty Limited (Franklins) | ||||||||||||||
| In terms of Australian legislation employers are required to contribute 9% of employees’ gross salaries to a superannuation fund of each employee’s choice. If employees do not specify a superannuation fund of choice, contributions must be made on behalf of the employee to a fund selected by the Company. Franklins provides its employees with a choice of two funds: | |||||||||||||||
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| A The InterFrank Superannuation Fund | |||||||||||||||
| This fund is for all corporate, head office and other non-retail employees. It is underwritten by AMP Life Limited as part of their Custom Super Plan. Approximately 213 employees are members of this Scheme. | |||||||||||||||
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| B The Retail Industry Superannuation Fund | |||||||||||||||
| This fund is for all employees covered by the Enterprise Bargaining Agreement. Approximately 3 790 employees are members of this fund. | |||||||||||||||
| Both funds are defined-contribution and non-contributory. | |||||||||||||||
| Seven employees have opted for their contributions to be made by Franklins on their behalf to complying superannuation funds of their choice. | |||||||||||||||
| Franklins has no other liability as regards retirement funding and there is no medical aid nor post-retirement medical aid liability. Medical aid is taken care of by the Federal Government Medicare Scheme and personal compulsory top-up arrangements. | |||||||||||||||
| 23.4 | Pick n Pay Retailers (Pty) Limited (Pick n Pay) | |||||
| The Pick n Pay Retirement Scheme comprises two separate funds, the Pick n Pay Non-contributory Provident Fund and the Pick n Pay Paid-up Pension Fund. | ||||||
| The Pick n Pay Retirement Scheme is defined-contribution in nature. However, certain members were guaranteed that should their defined-contribution benefit be less than their previous defined-benefit guarantee (under the previous Pick n Pay Retirement Fund) they would retain the former. Due to this guarantee, and the fact that the pensioners are also paid by this scheme, the scheme’s liabilities may be broken down between those which are defined-contribution in nature and those which are defined-benefit and for which the employer has an obligation to make additional contributions to ensure this element of the scheme is fully funded. | ||||||
| Pick n Pay contributes a total of 17.35% of salary towards the defined-contribution benefits offered to the members of the scheme. Out of this, 13.63% is allocated towards retirement savings and the balance, 3.72%, is allocated towards the reinsurance of death benefits, disability benefits and fund expenses. A further 0.86% of salary is contributed towards funding the guarantees outlined above. | ||||||
| There are 15 964 members of the Pick n Pay Retirement Scheme and 1 204 pensioners. | ||||||
| Retirement defined-benefit | ||||||
| Executive members of the previous Pick n Pay Retirement Fund are guaranteed that the capital value of their benefit at normal retirement date will not be less than that which they enjoyed under that fund. A defined-benefit obligation arises in this regard. | ||||||
| Post-retirement medical benefits | ||||||
| Members who joined the Pick n Pay Medical Scheme prior to 1 January 1997 will receive an additional pension on retirement to assist with post-retirement medical scheme contributions. Some of the members have already retired and are in receipt of a post-retirement medical pension. The full obligation for both active members and retirees is provided for in the financial statements. There is no subsidy for members who joined the Pick n Pay Medical Scheme after 1 January 1997. | ||||||
| Benefit fund | ||||||
| There was a separate fund to pay any disability benefit sanctioned by the trustees. The fund has been reinsured on a 100% profit share basis and hence the employer is required to make additional contributions to ensure this fund is fully funded at all times. This benefit fund has been fully insured by a third party. | ||||||
| Advisors | ||||||
| The Pick n Pay Retirement Scheme is administered by NMG Consultants and Actuaries Administrators. The consultants and actuaries are NMG Consultants and Actuaries. The investment advisor is Fifth Quadrant Actuaries and Consultants. | ||||||
| SACCAWU National Provident Fund | ||||||
| The SACCAWU Fund is administered by Old Mutual and is currently under curatorship. Employees, who are union members, have a choice of joining this fund instead of the Pick n Pay Retirement Scheme when they commence employment. There are 19 963 employees who have elected to join this fund. | ||||||
| GROUP | |||||||||
| Pensioners’ defined- benefit guarantee Rm |
Retirement defined- benefit guarantee Rm |
Post- retirement medical guarantee Rm |
Benefit fund Rm |
Total obligation 2011 Rm |
Total obligation 2010 Rm |
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| Defined-benefit obligations | |||||||||
| The amount recognised in the statement of financial position is as follows: | |||||||||
| Present value of funded obligations | 353.8 | 549.6 | 93.0 | — | 996.4 | 973.3 | |||
| Fair value of assets | (353.8) | (535.4) | (80.1) | — | (969.3) | (948.6) | |||
| Funded position | — | 14.2 | 12.9 | — | 27.1 | 24.7 | |||
| Amounts recognised in the statement of comprehensive income are as follows: | |||||||||
| Current service cost | — | 22.5 | 1.8 | — | 24.3 | 41.8 | |||
| Interest on the obligation | 28.6 | 47.3 | 6.7 | — | 82.6 | 113.8 | |||
| Expected return on the plan assets | (33.6) | (52.9) | (7.7) | 0.1 | (94.1) | (135.0) | |||
| Total included in employee costs | (5.0) | 16.9 | 0.8 | 0.1 | 12.8 | 20.6 | |||
| Cumulative unrecognised gains/(losses): | |||||||||
| Unrecognised gain – 1 March | — | — | — | — | — | 36.7 | |||
| Actuarial loss – obligation | (19.2) | (20.1) | (15.0) | — | (54.3) | (50.6) | |||
| Actuarial gain/(loss) – assets | 14.2 | 18.9 | 3.7 | 0.1 | 36.9 | (33.8) | |||
| Actuarial gain/(loss) recognised | 5.0 | 1.2 | 11.3 | (0.1) | 17.4 | 47.7 | |||
| Net cumulative unrecognised gain – 28 February | — | — | — | — | — | — | |||
| Movement in the liability recognised on the statement of financial position is as follows: | |||||||||
| Net liability – 1 March | — | 22.9 | — | 1.8 | 24.7 | 8.2 | |||
| Total included in employee costs in statement of comprehensive income | (5.0) | 16.9 | 0.8 | 0.1 | 12.8 | 20.6 | |||
| Amount recognised in other comprehensive income | 5.0 | 1.2 | 11.3 | (0.1) | 17.4 | 47.7 | |||
| Contributions | — | (26.8) | 0.8 | (1.8) | (27.8) | (51.8) | |||
| Net liability – 28 February | — | 14.2 | 12.9 | — | 27.1 | 24.7 | |||
| Movement in the fund’s obligations and plan assets recognised on the statement of financial position is as follows: | |||||||||||
| Change in liability | |||||||||||
| Liability – 1 March | 330.6 | 566.2 | 76.5 | — | 973.3 | 975.5 | |||||
| Service cost | — | 22.5 | 1.8 | — | 24.3 | 41.8 | |||||
| Interest cost | 28.6 | 47.3 | 6.7 | — | 82.6 | 113.8 | |||||
| Actuarial gain | 19.2 | 20.1 | 15.0 | — | 54.3 | 50.6 | |||||
| Benefits paid | (24.6) | (106.5) | (7.0) | — | (138.1) | (208.4) | |||||
| Liability – 28 February | 353.8 | 549.6 | 93.0 | — | 996.4 | 973.3 | |||||
| Change in plan assets | |||||||||||
| Plan assets – 1 March | 330.6 | 543.3 | 76.5 | (1.8) | 948.6 | 1 004.0 | |||||
| Expected return | 33.6 | 52.9 | 7.7 | (0.1) | 94.1 | 135.0 | |||||
| Actuarial gain/(loss) | 14.2 | 18.9 | 3.7 | 0.1 | 36.9 | (33.8) | |||||
| Contributions by employer | — | 26.8 | (0.8) | 1.8 | 27.8 | 51.8 | |||||
| Benefits paid | (24.6) | (106.5) | (7.0) | — | (138.1) | (208.4) | |||||
| Plan assets – 28 February | 353.8 | 535.4 | 80.1 | — | 969.3 | 948.6 | |||||
| % | % | % | % | % | % | ||||||
| Actuarial return on plan assets | 13.9 | 13.3 | 14.4 | 0.4 | 13.6 | 0.6 | |||||
| Asset mix | |||||||||||
| Equity | 25.2 | 65.1 | 65.1 | n/a | 50.6 | 65.9 | |||||
| Fixed interest | 72.4 | 28.6 | 28.6 | n/a | 44.6 | 28.2 | |||||
| Property | 2.4 | 6.3 | 6.3 | n/a | 4.8 | 5.9 | |||||
| 100.0 | 100.0 | 100.0 | n/a | 100.0 | 100.0 | ||||||
| The principal actuarial assumptions at the last valuation date are: | |||||||||||
| 1 November 2010 % per annum |
1 November 2009 % per annum |
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| Discount rate | 9.00 | 9.00 | |||||||||
| Future salary increases | 6.51 | 6.27 | |||||||||
| Future pension increases | 5.00 | 5.00 | |||||||||
| Annual increase in healthcare costs | 8.00 | 9.00 | |||||||||
| Expected rate of return* | 10.00 | 10.50 | |||||||||
| At 28 February 2011, if the discount rate had been 1% higher or 1% lower (with all other variables held constant), the impact on the financial statements would have been as follows: | |||||||||||
| As reported | |||||||||||
| 8% | 9% | 10% | |||||||||
| Rm | Rm | Rm | |||||||||
| Statement of comprehensive income | |||||||||||
| Expense included in employee costs | 17.2 | 12.8 | 8.8 | ||||||||
| Statement of financial position | |||||||||||
| Obligation at 28 February 2011 | 30.7 | 27.1 | 23.8 | ||||||||
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| GROUP | ||||||
| Defined- contribution benefits 2011 Rm |
Defined- contribution benefits 2010 Rm |
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| 23.5 | Current contributions | |||||
| Current contributions | 308.0 | 281.1 | ||||
| Continuing operations | 250.1 | 218.3 | ||||
| Discontinued operations | 57.9 | 62.8 | ||||
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Integrated Annual Report 2011|www.picknpay.co.za |
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