Page 139 - DUT Annual Report 2020

DURBAN UNIVERSITY OF TECHNOLOGY
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
9. RETIREMENT BENEFIT OBLIGATIONS (continued)
9.1 Pension obligations - National Tertiary Retirement Fund (“NTRF”) (continued)
The fund is financed by employer contributions. The only asset in the fund is the employer surplus account. This asset is creditor remote. Employer contributions equate to the benefits paid and are based on actuarial advice. The expense or income recorded in the surplus or deficit component of the statement of comprehensive income is determined by the sum of the current service cost, interest income on plan assets and interest expense.
The net defined plan asset to be recognised in the University's statement of financial position is subject to a maximum of the present value of any economic benefits available to the University in the form of refunds or reductions in future contributions.
The University matches the defined plan asset to the liability on an annual basis and top-up payments are made to the fund subsequent to valuations.
9.1.1 Exposure to actuarial risks
Investment risk
The actuarial funding valuations make assumptions about the returns that may be available on invested assets. If the actual return on plan assets is below this rate, it may lead to a strain on the fund, which over time, may result in a higher obligation for which the University would need to set aside additional funds.
Inflation and pension increase risk
Benefits in the plan are to some extent tied to inflation, so increased inflation levels represent a risk that could increase the costs of paying the fund’s guaranteed benefits.
Longevity risk
If pensioners live longer than expected then that will, all else equal, increase the University’s obligation as benefits will be paid for a longer term.
Salary risk
An increase in the salary of the plan participants will increase the plan’s liability. This risk has been limited to an extent as the fund is a closed scheme.
Measurement risk
The IAS 19 liabilities are determined using various assumptions about future experience. One of the most important assumptions is the discount rate derived from prevailing bond yields. A decrease in the discount rate will, all else equal, increases the plan liability; this may be partially offset by an increase in the value of assets. Other important assumptions are the, rate of return on assets, inflation, pension increase, salary increase and the longevity assumption and changes in those could affect the measured value of liabilities significantly. Changes in other assumptions used, such as demographics, mortality, withdrawal rate, ill health retirement, expected retirement age, age of spouses, average future working life of active members and the percentage of members married at retirement could also affect the measured liabilities.
DURBAN UNIVERSITY OF TECHNOLOGY ANNUAL REPORT 2020
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