Logo

Annual Report and Accounts 2011

Print this page Bookmark this page E-mail this page Make the text smaller Make the text bigger
Notes to the Annual Financial Statements
For the year ended 30 June 2011

Back to notes index

33. Pension scheme

The Company operates a defined benefit scheme and defined contribution scheme. The defined benefit scheme was acquired as part of the acquisition of Cullinan Diamond Mine (Pty) Ltd and is closed to new members. All new employees are required to join the defined contribution scheme. The assets of the pension schemes are held separately from those of the Group's assets.

Defined benefit scheme

The defined benefit scheme, which is contributory for members, provides benefits based on final pensionable salary and contributions.

The pension charge or income for the defined benefit scheme is assessed in accordance with the advice of a qualified actuary using the projected unit credit method. The most important assumptions made in connection with the charge or income were that the return on the funds will be 9.01% (30 June 2010: 11.39%), based on the average yield of South African Government long dated bonds plus 6.47%, and that salaries will be increased at 7.30% (30 June 2010: 7.20%), based on current South African consumer price index plus 1%. The market value of the assets of the defined benefit scheme at 30 June 2011 is R132.8 million (US$19.4 million) (30 June 2010: R140.1 million (US$18.3 million)) and the actuarial valuation of the assets on an ongoing basis represented 116.1% (30 June 2010: 128.7%) of the benefit of R120.6 million (US$17.6 million) (30 June 2010: R108.8 million (US$14.2 million)) that had accrued to members allowing for expected future increases in earnings. The pension surplus is R12.2 million (US$1.8 million) (30 June 2010: R31.3 million (US$4.1 million)). The pension fund values are converted using the year-end foreign exchange rate of US$1:R6.83 (30 June 2010: US$1:R7.65).

US$ million 2011 2010
Defined benefit obligations
Present value of funded obligations (17.6) (14.2)
Fair value of plan assets 19.4 18.3
Unrecognised net gain – paragraph 58 limit (1.8) (4.1)
Recognised surplus for defined benefit obligations
Movements in present value of the defined benefit
obligations recognised in the statement of financial position
Net surplus for the defined benefit obligation as at 1 July
Net expense recognised in the income statement (0.4) (0.4)
Contributions by employer 0.4 0.4
Unrecognised surplus due to IAS 19 paragraph 58 limit
Net surplus for defined benefit obligations at 30 June

Refer to note 1.17 for details of the limit applied to recognition of pension surplus asset.

US$ million 2011 2010
Income/(expense) recognised in the income statement
Current service cost (0.5) (0.4)
Finance expense (1.4) (1.2)
Expected return on assets 2.2 2.0
Unrecognised net gain 4.6 0.3
Recognition in terms of IAS 19 paragraph 58A (5.3) (1.1)
(0.4) (0.4)
Change in the fair value of the defined benefit assets
Net surplus for the defined benefit obligation as at 1 July 18.3 18.0
Foreign exchange movement on opening balances 2.0 0.6
Expected return on assets 1.8 2.0
Benefits paid to members (2.4) (2.0)
Contributions 0.6 0.5
Actuarial losses (0.9) (0.8)
At 30 June 19.4 18.3
Change in the present value of the defined benefit obligations
At 1 July (14.2) (13.4)
Foreign exchange movement on opening balance (1.5) (0.4)
Benefits paid to members 2.4 2.0
Current service cost (0.5) (0.4)
Finance cost (1.4) (1.2)
Contributions by members (0.2) (0.2)
Actuarial losses (2.2) (0.6)
At 30 June (17.6) (14.2)
Actuarial gains and losses
Actuarial losses on plan assets (0.9) (0.8)
Actuarial losses on plan liabilities (2.2) (0.6)
Analysis of plan assets
Cash 100.00% 10.00%
Equity 75.00%
Bonds 15.00%
Property
Other – offshore
100.00% 100.00%

2011
%
per annum
2010
%
per annum
Principal actuarial assumptions
Discount rate at 30 June 9.01% 9.39%
Expected return on plan assets at 30 June 9.01% 11.39%
Future salary increases 7.30% 7.20%
Inflation 6.30% 6.20%
Future pension increases 4.74% 4.65%

US$ million
Determination of estimated pension expense for the year ended 30 June 2012
Member contributions 0.2 0.2
Company contributions 0.4 0.4
Benefit payments (2.6) (2.2)
Deferred cumulative actuarial gains/(losses)
Funded status 1.8 4.1
Net change on assets 1.1 (0.8)
Net change on liabilities (3.4) (0.6)
(2.3) (1.4)

US$ million 2011 2010 2009
Defined benefit obligation trends
Plan assets 19.4 18.3 18.0
Plan liabilities (17.6) (14.2) (13.4)
Surplus/(deficit) 1.8 4.1 4.6

Assumptions regarding future mortality experience are set based on advice in accordance with published statistics and experience in the fund.

The average life expectancy in years of a pensioner retiring at the age of 65 on 30 June 2011 date is as follows:

2011 2010
Male 18.01 18.01
Female 22.52 22.52

Further to the acquisition of the defined benefit fund, the Group has no experience adjustments.

Back to top