Notes to the consolidated annual financial statements | Note 26

		2020 Rm	Restated* 2019 Rm
26	OTHER NON-CURRENT LIABILITIES
	Retirement benefit obligation	1 916	2 111
	Other payables	90	136
	Total per statement of financial position	2 006	2 247

Deferred income maintenance contracts have been reclassified to note 29 Contract liabilities. For further detail regarding reclassification refer to note 36.

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 Group's permanent employees are usually required to be members of either a pension or provident fund, depending on their preference and local legal requirements.

Altogether 83% 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.

Defined contribution plans

The total cost charged to profit or loss of R692 million (2019: R972 million) represents contributions payable to these schemes by the Group at rates specified in the rules of the schemes.

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, i.e. 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:

Changes in bond yields		A decrease in corporate bond yields will increase the value placed on the scheme's liabilities, although this will be partially offset by an increase in the value of the scheme's bond holdings.
Asset volatility		The liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets underperform this yield, this will create a deficit. The scheme holds a significant proportion of growth assets (equities and absolute return funds) which, though expected to outperform corporate bonds in the long-term, create volatility risk in the short term. The allocation to growth assets is monitored to ensure it remains appropriate given the scheme's longterm objectives.
Inflation risk		A significant proportion of the scheme's benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority A significant proportion of the assets are either unaffected by or only loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.
Life expectancy		The majority of the scheme's obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities.

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. The current recovery plan contribution of £13 million will be paid for nine years up to 1 April 2026. An additional contribution of £24 million was paid by the Company, bring the total contributions to £37 million over the accounting year.

	2020 Rm	2019 Rm
Past service cost		88
Plan administration expenses	17	11
Net loss recognised in profit or loss (note 3)	17	99
Net interest expenses	36	49
Components of defined benefit costs recognised in profit or loss	53	148

Actual return on plan assets	240	1 083

The scheme is valued by independent actuaries on a triennial basis with the valuation as at 1 April 2020 being the most recent valuation which is still in progress.

The scheme's IAS 19 accounting valuation at 30 September 2020 reflected a deficit of £88.9 million (R1.9 billion) which represents a decrease compared to the deficit in 2019 of £113 million (R2.1 billion). The discount rate decreased from 1.9% in 2019 to 1.5% in 2020. The decreased discount rate resulted in increased liabilities but asset returns were in excess of expectation and the Company made a recovery plan contribution of £37 million, which partially countered the increased liabilities .

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. The scheme has concluded two buy-ins with a current IAS19 valuation of £111 million. The trustees intend to continue to seek risk mitigation opportunities to reduce scheme volatility and match liabilities as far as possible. The interest rate hedging was increased to approximately 65% in the year, including the buy-in policies. The scheme invests in Liability Driven Investments (LDI) through use of bonds which match the duration of the liabilities.

The scheme's assets consist primarily of equities (local and offshore), corporate bonds, LDI and insurance policies. The markets performed well resulting in strong returns from the equity and bond markets, which resulted in returns over the year were being £44.8 million (R837 million) higher than projected.

Following a High Court case concluded in 2018, it was confirmed that Guaranteed Minimum Pensions (GMP) needed to be equalized. The IAS 19 balance sheet liabilities include an allowance for 30 September 2020 of £0 and 30 September 2019 £4.7 million for the potential costs of equalizing GMP for the impact between males and females. This cost was recognized as a Past Service cost in the current year's 2018/19 pension expense.

The amount included in the balance sheet arising from the Group's obligations in respect of the defined benefit Scheme is set out below:

	2020 Rm	2019 Rm
Present value of funded obligation	13 885	11 891
Fair value of plan assets	11 969	9 780
Net liability per statement of financial position	1 916	2 111
Movement in present value of funded obligation:
At beginning of year	11 891	10 533
Past service cost		88
Interest cost	261	301
Actuarial gains arising from changes in demographic assumptions	(131)	(168)
Actuarial losses arising from changes in financial assumptions	684	1 613
Actuarial gains arising from experience	(78)	(30)
Benefits paid	(572)	(582)
Exchange differences	1 830	136
At end of year	13 885	11 891
Movement in fair value of plan assets:
At beginning of year	9 780	8 780
Interest income	223	252
Actuarial gains recognised in the statement of comprehensive income	247	827
Plan administration expenses	(17)	(11)
Contributions	819	402
Benefits paid	(572)	(582)
Exchange differences	1 489	112
At end of year	11 969	9 780
Cumulative actuarial losses	222	3 945
Plan assets consist of the following:
- Equity instruments (%)	27	39
- Bonds (%)	60	24
- Cash (%)	13	37

The defined benefit funds was valued by an independent actuary as follows:

		Valuation interval	Latest statutory valuation
	Barloworld UK Pension Scheme	Triennial	1 April 2017*

The 2020 triennial valuation is still in progress.

Key assumptions used:

	2020	2019
Discount rate (%)	1.5	1.9
Expected rate of salary increases (%)	2.9	3.0
Future pension increases (%)	2.8	2.9
Mortality (table using year of birth)	S2PA	S2PA

Sensitivity to key assumptions	Operating expenses £000's	Net interest £000's	Total income statement expense £000's	Scheme assets £000's	Defined benefit obligation £000's	Deficit £000's
Current values	761	1 797	2 558	555 028	(643 899)	(88 871)
Following a 0.2% per annum increase in the discount rate	761	1 797	2 558	557 805	(664 254)	(106 449)
Following a 0.2% per annum increase in the inflation assumption	761	1 797	2 558	557 246	(659 178)	(101 932)
Following a 0.25% increase in the Long-term rate of improvement for post-retirement mortality	761	1 797	2 558	560 553	(673 330)	(112 777)

In assessing the Group's 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.