PENSION ASSET
for the year ended 30 September 2021
This information noted below summarises all key assumptions, valuation inputs and key disclosures relating to Tiger Brands
The company and its subsidiaries contribute to retirement plans that cover all employees. The retirement plans are either defined benefit plans or defined contribution plans and are funded. The assets of the funds are held in independent trustee administered funds, administered in terms of the Pension Funds Act 24 of 1956, as amended. In terms of the Pension Funds Act, certain of the retirement funds are exempt from actuarial valuation. Those funds not exempt from valuation must, in terms of the Pension Funds Act, be valued at least every three years. For purposes of production of these disclosures, and in order to comply with the requirements of IAS 19, valuations have been performed by independent actuaries, using the projected unit credit method. Where valuations were not possible due to the limited availability of complete data, roll forward projections of prior completed actuarial valuations were used, taking account of actual subsequent experience.
Within the company's group of subsidiaries, there are a total of 17 retirement plans, three of which are defined benefit pension funds, two are defined contribution pension funds, one is a defined benefit provident plan, one is a benefit fund and six are defined contribution provident funds. There are a further four schemes of insurance into which the company and its subsidiaries contribute. Certain companies within the group sponsor external death, funeral and disability benefit insurance policies. These insurance costs have been allowed for in the disclosures provided. All of the funds above are funded with one exception.
The actual return on plan assets for the period 1 October 2020 to 30 September 2021 was R21,9 million (2020: R17,8 million). This compares with the expected return for the same period of R31,0 million (2020: R35,8 million).
The value of contributions expected to be paid by group companies for the year ending 30 September 2022 amounts to R258,9 million (2021 actual: R256,6 million).
As at 30 September 2021, there were no properties occupied by, or other assets used by, group companies which formed part of the fair value of plan assets (2020: Rnil).
During the course of the year there was a transfer out of employer surplus totalling R39,5 million to other Tiger Brands’ funds.
As at 30 September 2021, the percentage of the fair value of plan assets in respect of defined benefit arrangements invested in Tiger Brands Limited shares amounted to 0% (2020: 0%).
Major categories of plan assets in respect of defined benefit arrangements as at 30 September are shown in the table below:
| GROUP | ||
| (%) | 2021 | 2020 |
| Equities | 1,7 | 5,4 |
|---|---|---|
| Bonds | 38,3 | 27,9 |
| Cash | 58,9 | 62,3 |
| Property | 0,1 | 0,7 |
| International | 0,9 | 2,9 |
| Other | 0,1 | 0,8 |
| 100,0 | 100,0 | |
| GROUP | ||
| (R’million) | 2021 | 2020 |
| Balance at the end of the year | ||
| Present value of defined benefit obligations | (244,2) | (238,5) |
| Fair value of plan assets in respect of defined benefit obligations | 376,5 | 396,7 |
| Funded status of defined benefit plans | 132,3 | 158,2 |
| Unrecognised due to paragraph 65 limit | (14,4) | (4,7) |
| Asset at reporting date | 117,9 | 153,5 |
The disclosure of the funded status is for accounting purposes only, and does not necessarily indicate any assets available to the company or its subsidiaries. Once a surplus apportionment exercise is completed, and approved by the Registrar of Pension Funds in terms of the provisions of the Pension Funds Second Amendment Act, 2001, only at that stage would it be appropriate for the company or its subsidiaries to recognise any assets in respect of the retirement funds, to the extent that they have apportioned such assets. The surplus apportionment schemes for the Tiger Brands Defined Benefit Pension Fund and the Beacon Products Staff Pension Fund were approved by the Registrar in 2008. The surplus apportionment scheme for the ICS Pension Fund was approved in 2011. Where appropriate, the surplus apportioned to the company has been recognised on the balance sheet. This legislation is not applicable to arrangements not registered in terms of the Pension Funds Act, such as special purpose entities established for purposes of providing disability benefits.
| GROUP | ||
| 2021 | 2020 | |
| Actuarial assumptions | ||
| The principal actuarial assumptions used for accounting purposes were: | ||
| Discount rate | Full yield | Full yield |
| Tiger Brands Defined Benefit Pension Fund | curve | curve |
| Tiger Oats Benefit Foundation | 5,1% | 3,9% |
| Nestlé Pension Fund | 11,9% | 15,2% |
| ICS Pension Fund | 5,1% | 3,9% |
| Tiger PRDBS Provident Fund | 5,1% | 3,9% |
| Future salary increases | 1% above | 1% above |
| Tiger Brands Defined Benefit Pension Fund | inflation + merit scale | inflation + merit scale |
| Nestlé Pension Fund | 7,8% + merit scale | 10,9% + merit scale |
| Defined contribution funds | 6,0% | 6,3% |
| ICS Pension Fund, Tiger Oats Benefit Foundation and Tiger PRDBS Provident Fund | 4,2% | 3,4% |
| Pension increase allowance | ||
| Tiger Brands Defined Benefit Pension Fund | 100% of inflation | 100% of inflation |
| Nestlé Pension Fund | 80% of inflation | 80% of inflation |
| Post-retirement discount rate | ||
| Tiger Brands Defined Benefit Pension Fund | 3,0% | 3,0% |
| Nestlé Pension Fund | 3,0% | 3,0% |
| GROUP | ||
| (R’million) | 2021 | 2020 |
| Reconciliation of the defined benefit obligation: | ||
| Defined benefit obligation at the beginning of the year | (238,5) | (273,7) |
| Current service cost | (6,0) | (4,3) |
| Member contributions | (0,5) | (0,7) |
| Interest cost | (24,5) | (22,3) |
| Actuarial gain/(loss) | 20,5 | (3,4) |
| Benefits paid | 1,7 | 63,2 |
| Administrative expenses | 2,9 | 2,5 |
| Risk premiums (Group Life and Permanent Health) | 0,2 | 0,2 |
| Defined benefit obligation at the end of the year | (244,2) | (238,5) |
| GROUP | ||
| (R’million) | 2021 | 2020 |
| Reconciliation of fair value of plan assets | ||
| Assets at fair market value at the beginning of the year | 396,7 | 441,8 |
| Interest on plan assets | 30,9 | 35,8 |
| Contributions | 2,2 | 2,8 |
| Risk premiums (Group Life and Permanent Health) | (0,2) | (0,2) |
| Benefits paid | (1,7) | (63,2) |
| Employer surplus transferred | (39,5) | – |
| Administrative expenses | (2,9) | (2,3) |
| Actuarial loss | (9,0) | (18,0) |
| Assets at fair market value at the end of the year | 376,5 | 396,7 |
| Reconciliation of asset ceiling | ||
| Unrecognised due to paragraph 64 limit | (14,4) | (4,7) |
| Asset ceiling at the end of the year | (14,4) | (4,7) |
| Asset balance at the end of the year | 117,9 | 153,5 |
The risks faced by the group as a result of pension obligations can be summarised as follows:
Sensitivity analysis
The sensitivity analysis has been prepared for the Tiger Brands Defined Benefit Pension Fund and the Nestlé Pension Fund. The liabilities of the Tiger Brands PRDBS Provident Fund are not sensitive to changes in either the discount rate or the inflation rate.
| (R’million) | Balance 2021 |
+1% | -1% |
| Discount rate | |||
| Defined benefit obligation (R’million) | (241,9) | (233,0) | (253,0) |
| Change (%) | (3,7) | 4,6 | |
| Inflation rate | |||
| Defined benefit obligation (R’million) | (241,9) | (252,9) | (233,0) |
| Change (%) | 4,6 | (3,7) |