HSRC Integrated Annual Report 2018/2019

118 / HSRC INTEGRATED ANNUAL REPORT 2018/19 PART E: ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2019 (Continued) 12.5.5 Withdrawal and Ill Health Assumptions The withdrawal assumptions have been set in line with those generally observed in the South African market. They are consistent with the previous valuation period, and noted on the table below: Age Males and Females 20 13.30% 25 13.30% 30 10.90% 35 8.20% 40 5.80% 45 4.10% 50 2.90% 55+ 0.00% 12.6 Summary of Valuation Methods 12.6.1 Liability Valuation Method The liability is taken as the present value of the employer’s share of active employee contributions projected into the future using the probability of survival to retirement age and beyond, taking into account the assumed rates of withdrawal and mortality. For each future continuation pensioner, the liability stops when the continuation pensioner and any remaining spouse are assumed to have died. For each active member, this projection is based on the probability of survival to retirement age and beyond, taking into account the assumed rates of withdrawal and mortality. For each pensioner, the liability stops when the pensioner and any remaining spouse are assumed to have died. 12.6.2 Valuation Method In accordance with the requirements of GRAP25, the Projected Unit Credit method of funding has been applied. The assumption underlying the funding method is that the employer’s post-employment medical scheme costs in respect of an employee should be fully recognised by the time that the employee reaches fully his/her accrued age. Although this liability only vests at retirement (or to remaining beneficiaries in the event of earlier death in early retirement age) and is not necessarily affected by the length of service that an employee has had with the employer, accounting standards require that the liability for in-service employees accrue uniformly while in service. The employer’s liability is taken as the present value of the obligation to settle post-employment health care contributions excluding the portion of contributions funded by the continuation pensioners. It has been assumed that the medical contribution subsidies will increase in line with health care cost inflation. We have made no allowance for volatility in the contributions due to fundamental changes in the underlying demographics of the scheme. Basis of valuation The liability has been valued on a contribution basis, where the liability is valued as the present value of the post- employment medical scheme contributions, in respect of the active employees and the continuation pensioners.