Pick n Pay | Integrated Annual Report: Financial Statements - Group of Companies Financial Statements, Notes to the Group Financial Statements

Pick n Pay Group of Companies financial statements

notes to the group financial statements

22.	RETIREMENT BENEFITS
	The Group, through its trading and employing subsidiaries, provides post-retirement benefits to its employees in accordance with local benchmarks in the countries that it operates in. These benefits are mainly provided through the Pick n Pay Retirement Scheme which incorporates the Pick n Pay Paid-up Pension Fund and the Pick n Pay Non-Contributory Provident Fund defined-contribution plans.
	The Group’s largest defined-contribution fund is the Pick n Pay Non-Contributory Provident Fund. Certain members of this fund 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 paid by the Pick n Pay Paid-up Pension Fund, the retirement scheme’s liabilities may be broken down between those which are defined contribution in nature and those which are defined benefit in nature and for which the employer has an obligation to make additional contributions to ensure this element of the scheme is fully funded. The defined-benefit and defined-contribution plans are regulated by the Pensions Funds Act, 1956 (of South Africa) and is governed by a board of trustees of the Pick n Pay Non-Contributory Provident Fund and Pick n Pay Paid-up Pension Fund, in line with governance policies set in terms of the PF130 circulars. The board of trustees of the Pick n Pay Non-Contributory Provident Fund comprises seven employer-appointed and seven member-elected trustees and for the Pick n Pay Paid-up Pension Fund it comprises two employer-appointed and two member-elected trustees.

		Pick n Pay Stores Group
		Pick n Pay Holdings Group
		Pensioners’ defined- benefit guarantee Rm	Retirement defined- benefit guarantee Rm	Post- retirement medical guarantee Rm	Total obligation 2015 Rm	Total obligation 2014 Rm
22.1	The Pick n Pay Retirement Scheme
	Defined-benefit obligations
	The amount recognised in the statement of financial position is as follows:
	Present value of funded obligations	522.6	554.9	4.3	1 081.8	1 146.3
	Fair value of assets	(522.6)	(683.9)	(4.3)	(1 210.8)	(1 255.0)
	Funded position	—	(129.0)	—	(129.0)	(108.7)
	Amounts recognised in the statement of comprehensive income are as follows:
	Current service cost	—	21.3	—	21.3	22.3
	Net interest on the obligation	—	(4.5)	—	(4.5)	(0.4)
	Total included in employee costs	—	16.8	—	16.8	21.9
	Asset ceiling
	Refund (employer surplus account)	—	70.1	—	70.1	85.1
		—	70.1	—	70.1	85.1
	Effect of asset ceiling – beginning of period	—	23.6	—	23.6	—
	Interest cost	—	2.0	—	2.0	—
	Remeasurement	—	33.3	—	33.3	23.6
	Effect of asset ceiling – end of period	—	58.9	—	58.9	23.6
	Movement in the asset recognised on the statement of financial position is as follows:
	Net asset – beginning of period	—	(85.1)	—	(85.1)	(1.8)
	Total included in employee costs in profit or loss (note 3.1)	—	16.8	—	16.8	21.9
	Amount recognised in other comprehensive income	—	(45.9)	—	(45.9)	(79.2)
	Refunds/(contributions)	—	44.1	—	44.1	(26.0)
	Net asset – end of period	—	(70.1)	—	(70.1)	(85.1)
	Remeasurement recognised in other comprehensive income
	Actuarial (gain)/loss as a result of changes in financial assumptions – assets	(13.3)	(86.3)	1.9	(97.7)	(200.4)
	Actuarial loss/(gain) as a result of changes in financial assumptions – obligations	13.3	7.1	(1.9)	18.5	97.6
	Effect of asset ceiling	—	33.3	—	33.3	23.6
	Remeasurement recognised in other comprehensive income (before tax)	—	(45.9)	—	(45.9)	(79.2)
	Movement in the fund’s obligations and plan assets recognised on the statement of financial position is as follows:
	Liability – beginning of period	500.8	603.2	42.3	1 146.3	1 047.9
	Service cost	—	21.3	—	21.3	22.3
	Interest cost	41.2	46.9	2.0	90.1	92.6
	Actuarial loss/(gain) as a result of changes in financial assumptions	13.3	7.1	(1.9)	18.5	97.6
	Benefits paid	(32.7)	(123.6)	(38.1)	(194.4)	(114.1)
	Liability – end of period	522.6	554.9	4.3	1 081.8	1 146.3
	Plan assets – beginning of period	500.8	711.9	42.3	1 255.0	1 049.7
	Interest	41.2	53.4	2.0	96.6	93.0
	Actuarial gain/(loss) as a result of changes in financial assumptions	13.3	86.3	(1.9)	97.7	200.4
	(Contributions)/refund	—	(44.1)	—	(44.1)	26.0
	Benefits paid	(32.7)	(123.6)	(38.1)	(194.4)	(114.1)
	Plan assets – end of period	522.6	683.9	4.3	1 210.8	1 255.0
		%	%	%	%	%
	Actuarial return on plan assets	8.2	8.6	7.6	8.4	25.5
	Composition of plan assets
	Equities	4.3	48.1	48.1	29.2	36.8
	Fixed interest – bonds	40.3	12.4	12.4	24.4	13.7
	Fixed interest – cash	2.1	0.7	0.7	1.3	1.0
	Property	—	4.0	4.0	2.3	3.1
	Offshore equities	15.1	14.0	14.0	14.5	21.3
	Offshore bonds	0.8	20.8	20.8	12.2	7.9
	Structured deposit	37.4	—	—	16.1	16.2
		100.0	100.0	100.0	100.0	100.0
	The value of contributions expected to be paid in the next financial period is R25 million.
	The weighted-average duration of the defined-benefit obligation is five years (2014: five years).
	All plan assets have quoted prices in active markets.


The principal actuarial assumptions at the last valuation date are:	November 2014 % per annum	November 2013 % per annum
Discount rate	8.8	8.5
Future salary increases	6.3	6.5
Future pension increases	6.0	6.0
Annual increase in healthcare costs	7.5	7.5
Sensitivity analysis
At 1 March 2015, if either salary inflation or 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:

	Discount rate effect			Salary inflation effect
	-1% 7.8%	As reported 8.8%	+1% 9.8%	-1% 5.3%	As reported 6.3%	+1% 7.3%
Statement of comprehensive income
Expense included in employee costs	17.5	16.8	16.4	16.7	16.8	17.0
Statement of financial position
Asset at end of period	(70.1)	(70.1)	(70.1)	(70.1)	(70.1)	(70.1)

	The following assumptions were used in the sensitivity analysis:
	The effect of a 1% change in the discount rate and a 1% change in the salary inflation rate were assessed independently of each other; As the minimum guarantee is applicable to provident fund members, the liability is unaffected by changes in the pension increase rate or by changes in mortality; The pension liability is also similarly unaffected by changes in the pension increase rate or by changes in mortality as the value of the notional pensioner account is much higher than the pensioner liability.
	The above assumptions are limited in that they do not cater for extreme events.

52 weeks

1 March

2015

52 weeks

2 March

2014

22.2

Defined current contribution benefits

Current contributions (note 3.1)

325.8

325.7