|24.||OTHER NON-CURRENT LIABILITIES|
|Retirement benefit obligation||1 753||2 236|
|Deferred income maintenance contract||340||333|
|Total per statement of financial position||2 243||2 672|
Retirement benefit information
It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end the groupís permanent employees are usually required to be members of either a pension or provident fund, depending on their preference and local legal requirements.
Altogether 74% of employees belong to one defined benefit and nine defined contribution retirement funds in which group employment is a prerequisite for membership. Of these, the defined benefit and five defined contribution funds are located outside of South Africa and accordingly are not subject to the provisions of the Pension Funds Act of 1956. A total of 21% of employees belong to defined contribution funds associated with industry or employee organisations.
Defined contribution plans
The total cost charged to profit or loss of R861 million (2017: R856 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes (note 3).
Defined benefit plans
The group sponsors a funded defined benefit scheme for qualifying employees in the United Kingdom.
The UK defined benefit scheme is administered by a board of trustees which manages the assets held in trust for the benefit of the scheme members. The trustee board of the pension scheme is composed of one employer representative, one member nominated representative and one independent professional trustee. The trustee board is required by the trust deed and rules, pension law and by its articles of association to act in the interests of all relevant stakeholders in the scheme, ie, current employees, former employees, retirees and dependants. The scheme closed to future accrual on 31 December 2016.
The scheme exposes the company to a number of risks, the most significant of which are:
As the scheme is closed to future accrual, future contributions into the scheme comprise solely recovery plan contributions if considered necessary. Following the latest triennial valuation at 1 April 2017 the deficit is planned to be funded via recovery plan contributions and investment returns from return-seeking assets. In terms of the recently agreed recovery plan nine instalments of £13 million will be paid starting from 1 April 2018 to 1 April 2026. This plan will be re-assessed as at April 2020.
The schemeís IAS 19 accounting valuation at 30 September 2018 reflected a deficit of £95 million (R1 753 million) which represents a decrease compared to the deficit in 2017 of £123 million (R2 236 million). The discount rate increased from 2.7% in 2017 to 2.9% in 2018. The increased discount rate together with asset returns and the recovery plan contribution of £10 million (R240 million), contributed to the lower deficit.
The trustee board carry out a strategic investment review following completion of each triennial valuation to ensure that the assets are managed in a manner appropriate to the nature and duration of the expected future retirement benefits payable under the scheme.
The trustee board and the group are actively considering mechanisms to reduce risk in the scheme. During 2016 the trustee secured a further insurance policy (buy-in) for some pensioner liabilities, bringing the total buy-ins up to a value of £120 million. The trustee intends to continue to seek risk mitigation opportunities to reduce scheme volatility and match liabilities as far as possible. The interest rate hedging is in the process of being increased from 33% to 50%, through use of bonds which match the duration of the liabilities.
The schemeís assets consist primarily of equities (local and offshore), corporate bonds and insurance policies. The markets performed well resulting in strong returns from the equity and bond markets, which resulted in returns being £4 million (R74 million) higher than projected.
The amount included in the balance sheet arising from the groupís obligations in respect of the defined benefit scheme is set out below:
The defined benefit funds was valued by an independent actuary as follows:
In assessing the groupís post-retirement liabilities, the group, following actuarial advice, has used standard mortality tables adjusted to reflect the mortality experience of the defined benefit scheme. The mortality assumption remained consistent with the prior year.