13. EMPLOYEE BENEFIT ASSETS AND LIABILITIES
 
2021 
R'm 		 2020 
R'm 
Retirement benefit asset  408  315 
Employer surplus asset  –  56 
Post-employment medical aid asset  18  16 
Post-employment medical aid obligation  (8) (8)
418  379 
Employee benefit liabilities 
Trattamento di Fine Rapporto (TFR) retirement benefit obligation  (147) (161)

The Group currently participates in the following pension and provident funds in southern Africa:

Name of fund Life
Healthcare
DB Pension
Fund		 Lifecare
Group
Holdings
Pension Fund		 Life
Healthcare
Provident
Fund		 Life
Healthcare
DC Pension
Fund		 Lifecare
National
Provident
Fund		 Old
Healthcare
Provident
Fund
Fund description Closed fund Dormant Active Active Dormant Dormant
Classification Defined benefit Defined benefit Defined contribution provident fund Defined contribution pension fund Defined benefit Defined benefit

The assets of all the funds, whether they are defined benefit or defined contribution, are held and administered separately from the Group's assets. The assets are administered on behalf of the funds by external financial services companies. All the funds are governed by the Pension Funds Act of 1956.

The active pension and provident funds require triennial statutory financial reviews. Financial reviews are, however, carried out annually to determine the solvency of the plans. Defined contribution funds are not guaranteed by the employer.

On 2 May 2019 approval was obtained from the Financial Sector Conduct Authority to transfer R166 million to the Employer Surplus Account (ESA) of the Life Healthcare Provident Fund with the effective date of transfer set as 31 January 2019. Life Healthcare has taken a partial contribution holiday (which came to an end during the year) in the Provident Fund, resulting in a portion of the employer contributions being paid from the ESA in the Provident Fund, and the balance being paid by the employer.

Pension funds

Actuarial assumptions applied in the valuation of the defined benefit funds:

Life Healthcare DB Pension Fund (LHC Fund) Lifecare Group Holdings Pension Fund
2021  
%  		 2020  
%  		 2021
%		 2020
%
Discount rate Yield curve1 11.3   5.0 3.9
CPI Yield curve2 6.23   3.3 2.40
Expected long-term investment return Yield curve1 11.3   5.0 3.9
Compensation increase rate Inflation curve + 1%3 7.23   n/a n/a
Pension increase rate Inflation curve4 6.234 n/a n/a
Rates of mortality 0.505 0.505 n/a n/a

The long-term investment return assumption is based on the expected long-term returns on equities, cash and bonds. In setting these assumptions the actual asset split of the various funds is used.

1 The discount rate used for active members and pensioners has been set as the spot rate yield curve for nominal government bonds as published by the Johannesburg Stock Exchange (JSE) as at 30 September 2021.
2 A long-term future CPI yield curve has been produced by taking the difference between the nominal spot rate yield curve and the real spot rate yield curve as published by the JSE as at 30 September 2021.
3 Salaries have been assumed to increase at an average of 1.00% per annum in excess of the assumed long-term inflation rate.
4 A future pension increase assumption of 100% of the long-term inflation assumption was used. This is in excess of the LHC Fund's formal pension increase target of 75% of CPI but is in line with the LHC Fund's secondary target of providing increases of up to 100% of CPI, subject to affordability. 15% of members have previously been expected to retire in the Fund and were assumed to receive a 100% CPI pension increase going forward. 85% of members were expected to retire outside the Fund, with their actuarial reserve values calculated allowing for 75% CPI pension increases going forward. This assumption has been changed to allow for 35% of members to retire in the Fund and 65% of members to exit the Fund. This is in line with Fund experience over the past three years.
5 The full mortality assumption is as follows: PA(90) rated down one year plus 0.5% improvement per annum from 2015.

The last statutory actuarial valuations for the funds were:

Life Healthcare DB Pension Fund This was due as at 30 June 2021 and will be completed in November 2021. The next statutory valuation report will be prepared as at 30 June 2024.
Lifecare Group Holdings Pension Fund 31 March 2019. The next statutory valuation report will be prepared as at 31 March 2022.

The main risk to the Company of sponsoring a defined benefit plan is that a net loss/deficit may arise.

In terms of legislation, any deficit arising from a triennial statutory valuation will need to be funded by the participating employer over the next three years.

Fund deficits tend to arise from any of the following events:

  • Reductions in asset values and/or investment returns lower than the valuation assumptions
  • Higher than expected salary and pension increases
  • A strengthening of the valuation assumptions from time to time
  • Increasing pensioner longevity
  • Cost increases resulting from unexpected legislation and tax changes

The Company contribution rate could increase in real terms in future.

Increases in the Company's contribution in real terms could be caused by an ageing membership, a strengthening of the actuarial valuation assumptions and increases in future real pensionable salaries.

The Group's obligations in respect of retirement benefits as measured in terms of IAS 19 are tabled below.

Life Healthcare DB Pension Fund Lifecare Group Holdings Pension Fund Life Healthcare Provident Fund
2021 
R'm 		 2020 
R'm 		 2021 
R'm 		 2020 
R'm 		 2021 
R'm 		 2020
R'm 
Defined benefit fund asset 
Balance at 1 October  315  304  –  –  56  136 
Net income/(expense) recognised in profit or loss  26  21  (1) (1) (51) (71)
Current service cost  (6) (8) (1) (1) –  – 
Company contributions  –  –  –  –  (57) (84)
Net interest income  32  29  –  –  6  13 
Remeasurement recognised in other comprehensive income  67  (10) 1  1  (5) (9)
Remeasurements on pension asset  78  (76) (4) 1  (5) (9)
Liability gain arising from changes in economic assumptions  16  49  19  3  –  – 
Experience variance gain  39  7  –  –  –  – 
Other remeasurement (loss)/gain  (66) 10  –  –  –  – 
Impact of paragraph 64 limit adjustment on asset  –  –  (14) (3) –  – 
Balance at 30 September  408  315  –  –  –  56 
Actual value of defined benefit liability and funded status 
Present value of defined benefit obligation  (467) (439) (68) (89) –  – 
Asset at fair market value  875  754  111  112  –  56 
Funded status  408  315  43  23  –  56 
Unrecognised due to ceiling  –  –  (43) (23) –  – 
Asset recognised in the statement of financial position  408  315  –  –  –  56 
Reconciliation of defined benefit obligation 
Balance at 1 October  (439) (490) (89) (118) –  – 
Service costs  (7) (8) (1) (1) –  – 
Contributions  (2) (2) –  –  –  – 
Interest cost  (50) (47) (3) (5) –  – 
Benefits paid  40  39  6  3  –  – 
Settlements  –  –  –  29  –  – 
Risk premiums  1  1  –  –  –  – 
Expenses  2  2  –  –  –  – 
Remeasurements  (12) 66  19  3  –  – 
Balance at 30 September  (467) (439) (68) (89) –  – 
Reconciliation of fair value of plan assets 
Balance at 1 October  754  794  112  141  56  136 
Expected return on assets  84  76  5  8  6  13 
Contributions  2  2  –  –  (57) (84)
Risk premiums  (1) (1) –  –  –  – 
Benefits paid  (40) (39) (6) (4) –  – 
Remeasurements  78  (76) (4) 1  (5) (9)
Settlements  –  –  5  (34) –  – 
Expenses  (2) (2) (1) –  –  – 
Balance at 30 September  875  754  111  112  –  56 
Composition of plan assets  %  %  %  %  %  % 
Cash  2.9  2.7  67.0  69.6  69.1  69.1 
Equity instruments  37.1  34.2  –  –  –  – 
Bonds  14.2  33.9  33.0  30.4  30.9  30.9 
Commodities  0.7  2.1  –  –  –  – 
Property  2.1  1.7  –  –  –  – 
Offshore and other  43.0  25.4  –  –  –  – 
100.0  100.0  100.0  100.0  100.0  100.0 
Life
Healthcare
DB Pension
Fund
R’m		 Lifecare
Group
Holdings
Pension
Fund
R’m
Expected contributions for the next annual reporting period:
Member contributions 2  – 
Company contributions 6  – 
Benefit payments (56) (6)
Expenses (2) (1)
Risk premiums (1) – 
The weighted average duration (years) 10.4  – 

An employer contribution rate of 22.73% was recommended in the interim actuarial valuation as at 30 June 2020. The employer contribution rate is fully funded from the employer-owned surplus within the Life Healthcare DB Pension Fund. The employer elected to take a full contribution holiday with effect from 1 December 2016, which came to an end during the year.

Sensitivity analysis
Life Healthcare DB Pension Fund
2021 2020
1% movement in the key assumptions: Increase  
R'm  		 Decrease 
R'm 		 Increase  
R'm  		 Decrease 
R'm 
Effect on the defined benefit obligation
Discount rate ( 30)  +36  (29)  +31 
Inflation rate +32   (29) +27   (26)
Pension increase rate –1 (31) –1 (30)
Mortality rate ( 11)  +11  (11)  +9 
1 The impact of a 1% increase in the future pension increase assumption is not included, as the normal valuation basis already assumes future pension increases of 100% of CPI, and in terms of the Fund's pension increase policy, increases of greater than 100% of CPI cannot be granted.
Lifecare Group Holdings Pension Fund

The active members had been transferred to another scheme in the 2018 financial year and had no liability as at the valuation date. The surplus liabilities and paid up liabilities are defined contribution type of benefits and are not affected by any assumptions made.

The assumptions that have the greatest impact on the Fund's valuation liabilities are the pre- and post-retirement valuation discount rates.

TFR retirement benefit obligation (AMG)

Italian employees are entitled to a payment when they cease to be employed by the Company under a TFR scheme. The scheme is not defined as a defined benefit pension but is an unfunded liability, and therefore not all requirements under IAS 19 (revised) are applicable and accordingly limited disclosure is provided below.

TFR scheme
2021
%		 2020
%
Actuarial assumptions applied in the valuation of the unfunded liability
Discount rate for liabilities 0.8 0.7
Inflation rate 0.8 1.2
Future salary increases 1.0 1.0
Future pension increases 2.1 2.4
2021 
R'm 		 2020 
R'm 
Reconciliation of the unfunded liability
Balance at 1 October (161) (130)
Service costs (13) (15)
Interest cost (1) (1)
Remeasurements 4  4 
Benefits paid 5  8 
Effect of foreign currency movement 19  (27)
Balance at 30 September (147) (161)
Sensitivity analysis
2021 2020
0.25% movement in the key assumptions: Increase 
R'm 		 Decrease 
R'm 		 Increase 
R'm 		 Decrease 
R'm 
Effect on TFR unfunded liability
Discount rate (4) +4  (4) +2 
Inflation rate +3  (3) +1  (3)
Future salary increases +1  (1) –  (5)
Post-employment medical aid benefit (southern Africa)

Life Healthcare Group has a liability arising as a result of a post-employment employer subsidy of healthcare benefits. Members of certain medical aid plans, who joined the Company before 1 November 1996 and remain in the employment of Life Healthcare Group until retirement, are eligible for a post-employment subsidy of their medical contributions.

Life Healthcare carries a fully funded liability for a post-retirement medical aid subsidy in respect of 5 (2020: 7) employees and 31 (2020: 33) pensioners who did not accept an alternative benefit offer made by the Company during the 2013 financial year.

The post-employment medical aid liability is funded via investments held in the PFV benefit fund and is a closed fund.

Life Healthcare Group is liable to make good on any shortfalls in the fund.

The benefit fund meets the definition of a defined benefit plan and has been disclosed in accordance with IAS 19.

The plan represents the market value of the assets.

The defined benefit fund is actuarially valued using the projected unit credit method.

Post-employment medical aid benefit
2021
%		 2020
%
The following actuarial assumptions were applied:
Discount rate 10.3 10.8
CPI 5.9 6.0
Expected return on assets 10.3 10.8
Healthcare cost inflation 7.9 8.0

The Group's obligation in respect of post-employment medical aid benefit is tabled below:

2021 
R'm 		 2020 
R'm 
Defined benefit fund asset 
Balance at 1 October  8  8 
Net periodic income 
Net interest income  1  1 
Remeasurement recognised in other comprehensive income 
    Profit/(loss) on benefit payments from plan assets  1  (1)
Balance at 30 September  10  8 
Actual value of defined benefit liability and funded status 
Present value of defined benefit obligation  (8) (8)
Asset at fair market value  18  16 
Funded status  10  8 
Asset recognised in the statement of financial position  10  8 
Sensitivity analysis
2021 2020
1% movement in the key assumptions: Increase 
R'm 		 Decrease 
R'm 		 Increase 
R'm 		 Decrease 
R'm 
Effect on the defined benefit obligation
Healthcare cost inflation rate –  (1) +1  (1)
Discount rate (1) –  (1) +1