| | | 32 | Retirement benefit obligations | | |
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(a) | Pension and provident funds: The group contributes to several pension and provident funds governed by the Pension Funds Act, 1956 for the employees of its South African subsidiaries. The pension funds are multi-employer industry plans. The group’s liability is limited to its annually determined contributions. | | |
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| The provident funds are funded on a ‘‘money accumulative basis’’ with the members’ and employer’s contributions having been fixed in the constitution of the funds. | | |
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The Australian group companies make contributions to each employee’s superannuation (pension) fund in accordance with the Superannuation Guarantee Scheme (SGS). The SGS is a Federal Government initiative enforced by law which compels employers to make regular payments to regulated funds providing for each employee on their retirement. The SGS was set at a minimum of 9% of gross salary and wages for the 2010 financial year (2009: 9%). The fund is a defined contribution plan. | | |
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| Substantially all the group’s employees are covered by the above mentioned retirement benefit plans. Funds contributed by the group for the 2010 financial year amounted to R418 million (US$55.2 million)
(2009: R358 million (US$39.8 million)). | | |
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(b) | Post-retirement benefits other than pensions: Most of the supervisory and managerial workers in South Africa participate in the Minemed medical scheme, as well as other medical schemes. The group contributes to these schemes on behalf of current employees and employees who retired prior to 31 December 1996 (Minemed scheme). The annual contributions for these retired employees are fixed. The group’s contributions to these schemes on behalf of current employees amounted to R106 million (US$13.9 million) for 2010 and R78 million (US$8.6 million) for 2009. | | |
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| | | | Harmony inherited a post-retirement medical benefit obligation, which existed at the time of the Freegold acquisition in 2002. The group’s obligation in this regard, is to pay a subsidy of 2% for every completed year of employment up to a maximum of 50% of total medical aid contributions, commencing on date of retirement. Should the employee die, either in service or after retirement, this benefit will transfer to his/her dependants. | | |
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| | | | The medical aid tariffs are based on the Minemed medical scheme options. Except for the pre-mentioned employees, Harmony has no other post-retirement obligation for the other group employees. | | |
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| | | | Assumptions used to determine this liability include a discount rate of 10.3%, a mortality rate according to the SA 1956/62 mortality table and a medical inflation rate of 8.1%. It is also assumed that all members will retire at the age of 60 and remain on the current benefit option. | | |
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| | | | The liability is based on an actuarial valuation conducted during the financial year ended 30 June 2010, using the projected unit credit method. The next actuarial valuation will be performed on 30 June 2011. | | |
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| 152 | 153 | | Present value of unfunded obligations | 20 | 20 |
| | | | Movement in liability recognised in the balance sheet | | |
| 130 | 152 | | Balance at beginning of year | 20 | 17 |
| (3) | (4) | | Contributions paid | (1) | – |
| 10 | 4 | | Other expenses included in staff costs/current service cost | 1 | 1 |
| 15 | 15 | | Interest cost | 2 | 2 |
| – | 7 | | Net actuarial loss recognised during the year(1) | 1 | – |
| – | (21) | | Curtailments(2) | (3) | – |
| 152 | 153 | | Balance at end of year | 20 | 20 |
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(1) | The net actuarial loss recognised during the 2008 year was R12 million (US$2 million), 2007 year a gain of R12 million (US$2 million) and in the 2006 financial year a loss of R9 million (US$1.3 million). | | |
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(2) | The terms of employment of 124 members changed, resulting in a reduction of the liability of R21 million (US$2.8 million). | | |
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| | | | The principal actuarial assumptions used for accounting purposes were: | | |
| 10.0% | 10.3% | | Discount rate | 10.3% | 10.0% |
| 7.8% | 8.1% | | Healthcare inflation rate | 8.1% | 7.8% |
| 60 | 60 | | Normal retirement age | 60 | 60 |
| | | | The net liability of the defined benefit plan is as follows: | | |
| 152 | 153 | | Present value of defined benefit obligation | 20 | 20 |
| – | – | | Fair value of plan assets | – | – |
| 152 | 153 | | Net liability | 20 | 20 |
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| | | | The present value of the defined benefit obligation was R130 million (US$17 million) in the 2008 financial year, R107 million (US$15.2 million) in 2007 and R107 million (US$14.9 million) in 2006. | | |
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| | | | The effect of a one percentage point increase and decrease in the assumed medical cost trend rates is as follows: | | |
| 1% | 1% | | | | 1% | 1% |
| Increase | Increase | | | | Increase | Increase |
| | | | Effect on: | | |
| 3 | 4 | | Aggregate of service cost and interest cost | 1 | – |
| 26 | 25 | | Defined benefit obligation | 4 | 3 |
| 1% | 1% | | | | 1% | 1% |
| Decrease | Decrease | | | | Decrease | Decrease |
| | | | Effect on: | | |
| 3 | 3 | | Aggregate of service cost and interest cost | 1 | – |
| 21 | 20 | | Defined benefit obligation | 4 | 3 |
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| | | | The group expects to contribute approximately R4.5 million (US$0.6 million) to its benefit plan in 2011. | | |