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

34. Post-retirement medical fund

The Company operates a post-employment health care liability scheme. The post-employment health care liability scheme was acquired as part of the acquisition of Cullinan Diamond Mine (Pty) Ltd and is closed to new members. All new employees will be responsible for funding their own post-employment health care liability costs.

The benefit liability for the post-employment health care liability scheme is assessed in accordance with the advice of a qualified actuary using the projected unit credit method. The Group obtained a valuation using a third party actuary at 30 June 2010 and management has updated that valuation report for 30 June 2011. This is considered sufficient to achieve a materially accurate valuation. The Group's post-employment health care liability consists of a commitment to pay a portion of the members' post-employment medical scheme contributions. This liability is also generated in respect of dependants who are offered continued membership of the medical scheme on the death of the primary member. The most important assumptions made in connection with the charge or income were that the health care cost of inflation will be 6.75% (30 June 2010: 6.75%), based on the average yield of South African Government long dated bonds of 9.25% (30 June 2010: 9.25%), and that salaries will be increased at 5.75% (30 June 2010: 5.75%). The actuarial accrued liability funded status of the post-employment health care liability scheme at 30 June 2011 is R45.5 million (US$6.7 million) (30 June 2010: R40.7 million (US$5.2 million)). The post-employment health care liability 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
Post-retirement medical fund
Present value of post-employment medical care obligations 6.7 5.3
Unfunded status at 30 June 6.7 5.3
Movements in present value of the post-retirement
medical fund obligations recognised in the statement of financial position
Net liability for the post retirement medical fund obligation as at 1 July 5.3 2.0
Arising on acquisition of subsidiary 2.5
Net expense recognised in the income statement 0.8 0.7
Net discount rate change 0.1
Changes in % continuing at post-employment (1.3)
Membership changes 0.3
Medical care inflation 0.9
Other 0.6 0.1
Net liability for post-employment medical care obligations at 30 June 6.7 5.3
Expense recognised in the income statement
Current service cost 0.2 0.3
Finance expense 0.6 0.4
0.8 0.7
The expense is recognised in the following line items in the income statement
Mining and processing costs 0.2 0.3
Finance expense 0.6 0.4
0.8 0.7
Reconciliation of fair value of scheme liabilities
At 1 July 5.3 2.0
Arising on acquisition of subsidiary 2.5
Net expense recognised in the income statement 0.8 0.7
Net discount rate change 0.1
Changes in % continuing at post-employment (1.3)
Membership changes 0.3
Medical care inflation 0.9
Other 0.6 0.1
Liabilities at fair market value as at 30 June 6.7 5.3

%
per annum
%
per annum
Principal actuarial assumptions
Discount rate at 30 June 9.25% 9.25%
Health care cost inflation 6.75% 6.75%
Future salary increases 5.75% 5.75%
Net replacement ratio 60.00% 60.00%
Net discount rate 2.34% 2.34%
Normal retirement age (years) 60.0 60.0
Fully accrued age (years) 60.0 60.0

US$ million 2011 2010
Determination of estimated post-retirement
medical fund expense for the year ended 30 June 2012
Current service cost 0.2 0.2
Finance expense 0.6 0.5
Benefit payments (0.1) (0.1)
Cumulative actuarial gains/(losses)
Unfunded status
Net change on liabilities 1.3 0.7
1.3 0.7

US$ million 2011 2010 2009
Actuarial accrued liability
Funded status 6.7 5.2 2.0

Sensitivity analysis

Health care inflation rate

The effect of a 1% increase or decrease in the health care inflation rate on the post-retirement medical fund accrued liability is as follows:

US$ million 30 June 2011 1% increase 1% decrease
Accrued liability 6.7 7.9 4.5
% difference 19.7% (31.8%)

US$ million 30 June 2010 1% increase 1% decrease
Accrued liability 5.3 6.4 4.4
% difference 19.9% (15.8%)

Average retirement age

The table below shows the impact of a one year change in the expected average retirement age:

US$ million 30 June 2011 Retirement
one year
earlier
Retirement
one year
later
Accrued liability 6.7 6.9 6.2
% difference 4.5% (6.0%)

US$ million 30 June 2010 Retirement
one year
earlier
Retirement
one year
later
Accrued liability 5.3 5.6 5.0
% difference 5.9% (5.5%)

Back to top