The group provides post-retirement medical and pension benefits to certain of its retirees, principally in South Africa, Europe and the United States of America. Generally, medical cover provides for a specified percentage of most medical expenses, subject to pre-set rules and maximum amounts. Pension benefits are payable in the form of retirement, disability and surviving dependent pensions. The medical benefits are unfunded. The pension benefits in South Africa are funded. In the United States of America certain of our Pension Funds are funded.

The group operates or contributes to defined contribution pension plans and defined benefit pension plans for its employees in certain of the countries in which it operates. These plans are generally funded through payments to trustee-administered funds as determined by annual actuarial calculations.

Defined contribution pension plans are plans under which the group pays fixed contributions into a separate legal entity and has no legal or constructive obligation to pay further amounts. Contributions to defined contribution pension plans are charged to the income statement as an employee expense in the period in which the related services are rendered by the employee.

The group’s net obligation in respect of defined benefit pension plans is actuarially calculated separately for each plan by deducting the fair value of plan assets from the gross obligation for post-retirement benefits. The gross obligation is determined by estimating the future benefit attributable to members in return for services rendered to date.

This future benefit is discounted to determine its present value, using discount rates based on government bonds for South African obligations, and corporate bonds in Europe and the US, that have maturity dates approximating the terms of the group’s obligations and which are denominated in the currency in which the benefits are expected to be paid. Independent actuaries perform this calculation annually using the projected unit credit method.

Defined contribution members employed before 2009 have an option to purchase a defined benefit pension with their member share. This option gives rise to actuarial risk, and as such, these members are accounted for as part of the defined benefit fund and are disclosed as such.

Past service costs are charged to the income statement at the earlier of the following dates:

Actuarial gains and losses arising from experience adjustments and changes to actuarial assumptions, the return on plan assets (excluding amounts included in net interest on the defined benefit liability/(asset)) and any changes in the effect of the asset ceiling (excluding amounts included in net interest on the defined benefit liability/(asset)) are remeasurements that are recognised in other comprehensive income in the period in which they arise.

Where the plan assets exceed the gross obligation, the asset recognised is limited to the lower of the surplus in the defined benefit plan and the asset ceiling, determined using a discount rate based on government bonds.

Surpluses and deficits in the various plans are not offset.

The entitlement to healthcare benefits is usually based on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued on a systematic basis over the expected remaining period of employment, using the accounting methodology described in respect of defined benefit pension plans above. Independent actuaries perform the calculation of this obligation annually.


	Healthcare benefits	Pension benefits
Last actuarial valuation — South Africa	31 March 2021	31 March 2021
Last actuarial valuation — United States of America	30 June 2021	30 June 2021
Last actuarial valuation — Europe	n/a	1 April 2021
Full/interim valuation	Full	Full
Valuation method adopted	Projected unit credit	Projected unit credit

The plans have been assessed by the actuaries and have been found to be in sound financial positions.

35	Post-retirement benefit obligations continued

Principal actuarial assumptions

Weighted average assumptions used in performing actuarial valuations determined in consultation with independent actuaries.

United States of

South Africa

America

Europe

2021

2020

2021

2020

2021

2020

at valuation date

Healthcare cost inflation

7,5

7,5

n/a

n/a

n/a

n/a

Discount rate — post- retirement medical benefits

11,6

13,3

2,7

2,3

n/a

n/a

Discount rate — pension benefits

11,1

12,2

2,0

2,2

1,2

1,4

Pension increase assumption

5,2

6,1

n/a

n/a

1,8

1,8

Average salary increases

5,5

5,5

4,2

4,2

2,8

2,8

Weighted average duration of the obligation — post- retirement medical obligation

13 years

14 years

12 years

11 years

n/a

n/a

Weighted average duration of the obligation — pension obligation

12 years

12 years

7 years

***

14 years

18 years

18 years

Assumptions regarding future mortality are based on published statistics and mortality tables.

The healthcare cost inflation rate in respect of the plans for the United States of America is capped. All additional future increases due to the healthcare cost inflation will be borne by the participants.

There are no automatic pension increases for the United States of America pension plan.

***

The decrease in 2021 is as a result of the large number of employees transferring to the Louisiana Integrated Polyethylene Joint Venture. Refer to note 23.

In South Africa, certain healthcare and life assurance benefits are provided to South African employees hired prior to 1 January 1998, who retire and satisfy the necessary requirements of the medical fund.

35	Post-retirement benefit obligations continued

35.1	Post-retirement healthcare obligations

Reconciliation of the total post-retirement healthcare obligation recognised in the statement of financial position


	South Africa		United States of America		Total
	2021	2020	2021	2020	2021	2020
for the year ended 30 June	Rm	Rm	Rm	Rm	Rm	Rm
Total post-retirement healthcare obligation at beginning of year	2 992	3 825	385	268	3 377	4 093
Movements recognised in the income statement:	413	440	(6)	27	407	467
current service cost	26	45	18	18	44	63
interest cost	387	395	7	9	394	404
curtailments and settlements	—	—	(31)	—	(31)	—
Actuarial (gains)/losses recognised in other comprehensive income:	237	(1 085)	(36)	45	201	(1 040)
arising from changes in financial assumptions	539	(1 026)	(12)	44	527	(982)
arising from changes in demographic assumptions	—	—	—	(3)	—	(3)
arising from changes in actuarial experience	(302)	(59)	(24)	4	(326)	(55)
Benefits paid	(186)	(180)	(23)	(22)	(209)	(202)
Transfer to disposal groups held for sale	—	(8)	—	—	—	(8)
Translation of foreign operations	—	—	(63)	67	(63)	67
Total post-retirement healthcare obligation at end of year	3 456	2 992	257	385	3 713	3 377

The sensitivity analysis is performed in order to assess how the post-retirement healthcare obligation would be affected by changes in the actuarial assumptions underpinning the calculation.


	South Africa		United States of America
	2021	2020	2021		2020
for the year ended 30 June	Rm	Rm	Rm		Rm
1% point change in actuarial assumptions:
Increase in the healthcare cost inflation	411	325	—	*	—	*
Decrease in the healthcare cost inflation	(344)	(280)	—	*	—	*
Increase in the discount rate	(329)	(264)	(25)		(38)
Decrease in the discount rate	399	310	34		47

A change in the healthcare cost inflation for the United States of America will not have an effect on the above components or the obligation as the employer’s cost is capped and all future increases due to the healthcare cost inflation are borne by the participants. There are no automatic pension increases for the United States pension plan.

A change in the pension increase assumption will not have an effect on the above obligation. In South Africa the post-retirement benefit contributions are linked to medical aid inflation and based on a percentage of income or pension. Where pension increases differ from medical aid inflation, the difference will need to be allowed for in a change in the percentage of income or pension charged. The are no automatic pension increase for the United states pension plan.

The sensitivities may not be representative of the actual change in the post-retirement healthcare obligation, as it is unlikely that the changes would occur in isolation of one another, and some of the assumptions may be correlated.

35	Post-retirement healthcare obligations continued

Healthcare cost inflation risk

Healthcare cost inflation is consumer price index inflation plus two percentage points over the long term. An increase in healthcare cost inflation will increase the obligation of the plan.

Discount rate risk

The discount rate is derived from prevailing bond yields. A decrease in the discount rate will increase the obligation of the plan.

Pension increase risk

The South African healthcare plan is linked to pension benefits paid, which are to some extent linked to inflation. Accordingly, increased inflation levels represent a risk that could increase the cost of paying the funds committed to benefits.

Other

Changes in other assumptions used could also affect the measured liabilities. There is also a regulatory risk as well as foreign funds under the jurisdiction of other countries. To the extent that governments can change the regulatory frameworks, there may be a risk that minimum benefits or minimum pension increases may be instituted, increasing the associated cost for the fund.

35.2	Pension benefits

South African operations Background

In 1994, all members were given the choice to voluntarily transfer to the newly established defined contribution section of the pension fund and approximately 99% of contributing members chose to transfer to the defined contribution section.

Defined benefit option for defined contribution members

In terms of the rules of the fund, on retirement, employees employed before 1 January 2009 have an option to purchase a defined benefit pension with their member share. Should a member elect this option, the group is exposed to actuarial risk. In terms of IAS 19, the classification requirements stipulate that where an employer is exposed to any actuarial risk, the fund must be classified as a defined benefit plan.

Fund assets

The assets of the fund are held separately from those of the company in a trustee administered fund, registered in terms of the South African Pension Funds Act, 1956. Included in the fund assets at 31 March 2021 are 2 082 248 (2020 — 2 079 248) Sasol ordinary shares valued at R454 million (2020 — R275 million) at year-end purchased under terms of an approved investment strategy, and property valued at R1 521 million (2020 — R1 555 million) that is currently occupied by Sasol.

35	Post-retirement benefit obligations continued

35.2Pension benefits Continued

Membership

A significant number of employees are covered by union sponsored, collectively bargained, and in some cases, multi-employer defined contribution pension plans. Information from the administrators of these plans offering defined benefits is not sufficient to permit the company to determine its share, if any, of any unfunded vested benefits.

Pension fund assets

The assets of the pension funds are invested as follows:


	South Africa		United States of America
	2021	2020	2021	2020
at 30 June	%	%	%	%
Equities	54	47	30	35
resources	7	5	4	5
industrials	2	2	3	4
consumer discretionary	11	9	4	4
consumer staples	9	9	2	2
healthcare	5	5	4	5
information technologies	6	6	6	7
telecommunications	4	3	2	3
financials (ex real estate)	10	8	5	5
Fixed interest	16	17	50	49
Direct property	11	15	6	6
Listed property	2	2	—	—
Cash and cash equivalents	4	7	—	—
Third party managed assets	12	12	—	—
Other	1	—	14	10
Total	100	100	100	100

The pension fund assets are measured at fair value at valuation date. The fair value of equity has been calculated by reference to quoted prices in an active market. The fair value of property and other assets has been determined by performing market valuations and using other valuation techniques at the end of each reporting period.

35	Post-retirement benefit obligations continued

35.2Pension benefits Continued

Investment strategy

The trustees target the plans’ asset allocation within the following ranges within each asset class:


	South Africa¹		United States of America
	Minimum	Maximum	Minimum	Maximum
Asset classes	%	%	%	%
Equities
local	30	45	—	100
foreign	15	30	—	100
Fixed interest	5	25	—	100
Property	10	25	—	100
Other	—	15	—	100

Members of the defined contribution scheme have a choice of four investment portfolios. The targeted allocation disclosed represents the moderate balanced investment portfolio which the majority of the members of the scheme have adopted. The total assets of the fund under these investment portfolios are R272 million, R58 010 million, R1 027 million and R2 040 million for the low risk portfolio, moderate balanced portfolio, aggressive balanced portfolio and money market portfolio, respectively. Defined benefit members’ funds are invested in the moderate balanced portfolio. The money market portfolio is restricted to active members from age 55.

The trustees of the respective funds monitor investment performance and portfolio characteristics on a regular basis to ensure that managers are meeting expectations with respect to their investment approach. There are restrictions and controls placed on managers in this regard.

Reconciliation of the projected net pension liability/(asset) recognised in the statement of financial position


	South Africa		Foreign		Total
	2021	2020	2021	2020	2021	2020
for the year ended 30 June	Rm	Rm	Rm	Rm	Rm	Rm
Projected benefit obligation (funded)	57 054	47 228	3 240	4 757	60 294	51 985
defined benefit portion	25 119	20 860	3 240	4 757	28 359	25 617
defined benefit option for defined contribution members	31 935	26 368	—	—	31 935	26 368
Plan assets	(60 671)	(50 618)	(3 732)	(4 502)	(64 403)	(55 120)
defined benefit portion	(28 736)	(23 020)	(3 732)	(4 502)	(32 468)	(27 522)
defined benefit option for defined contribution members	(31 935)	(27 598)	—	—	(31 935)	(27 598)
Projected benefit obligation (unfunded)	—	—	10 028	11 564	10 028	11 564
Asset not recognised due to asset limitation	3 571	2 923	—	—	3 571	2 923
Net liability/(asset) recognised	(46)	(467)	9 536	11 819	9 490	11 352

The increase of R648 million in the asset limitation (2020 — R604 million) was recognised as a loss in other comprehensive income.

The obligation which arises for the defined contribution members with the option to purchase into the defined benefit fund is limited to the assets that they have accumulated until retirement date. However, after retirement date, there is actuarial risk associated with the members as full defined benefit members.

35	Post-retirement benefit obligations continued

35.2Pension benefits Continued

Based on the latest actuarial valuation of the fund and the approval of the trustees of the surplus allocation, the company has an unconditional entitlement to only the funds in the employer surplus account and the contribution reserve. As part of the group's continued cash conservation measures in the current financial year, the employer surplus account was utilised to fund the employer contributions towards the retirement fund. The remaining estimated surplus due to the company amounted to approximately R46 million (2020 — R467 million) and has been included in the pension asset recognised in the current year.

Investment risk

The actuarial valuation assumes certain asset returns on invested assets. If actual returns on plan assets are below the assumption, this may lead to a strain on the fund, which, over time, may lead to a plan deficit. In order to mitigate the concentration risk, the fund assets are invested across equity securities, property securities and debt securities. Given the long-term nature of the obligations, it is considered appropriate that investment is made in equities and real estate to improve the return generated by the fund. These may result in improved pension benefits to members.

Pension increase risk

Benefits in these plans are to some extent linked to inflation so increased inflation levels represent a risk that could increase the cost of paying the funds committed to benefits. This risk is mitigated as pension benefits are subject to affordability.

Discount rate risk

The discount rate is derived from prevailing bond yields. A decrease in the discount rate used will increase the obligation of the plan.

Other

35	Post-retirement benefit obligations continued

35.2Pension benefits Continued

Reconciliation of projected benefit obligation


	South Africa		Foreign		Total
	2021	2020	2021	2020	2021	2020
for the year ended 30 June	Rm	Rm	Rm	Rm	Rm	Rm
Projected benefit obligation at beginning of year	47 228	51 241	16 321	12 565	63 549	63 806
Movements recognised in income statement:	6 571	6 218	677	855	7 248	7 073
current service cost	923	1 150	579	572	1 502	1 722
past service cost	—	—	—	39	—	39
curtailments and settlements	—	—	(129)	—	(129)	—
interest cost	5 648	5 068	227	244	5 875	5 312
Actuarial (gains)/losses recognised in other comprehensive income:	6 093	(7 938)	(378)	1 017	5 715	(6 921)
arising from changes in demographic assumptions	—	—	(1)	16	(1)	16
arising from changes in financial assumptions	303	(1 105)	(452)	742	(149)	(363)
arising from change in actuarial experience	5 790	(6 833)	75	259	5 865	(6 574)
Member contributions	503	504	—	—	503	504
Benefits paid	(3 341)	(2 797)	(1 070)	(988)	(4 411)	(3 785)
Transferred to held for sale assets	—	—	—	—	—	—
Translation of foreign operations	—	—	(2 282)	2 872	(2 282)	2 872
Projected benefit obligation at end of year	57 054	47 228	13 268	16 321	70 322	63 549
unfunded obligation*	—	—	10 028	11 564	10 028	11 564
funded obligation	57 054	47 228	3 240	4 757	60 294	51 985

Certain of the foreign defined benefit plans have reimbursement rights under contractually agreed legal binding terms that match the amount and timing of some of the benefits payable under the plan. This reimbursive right has been recognised in long-term receivables at fair value of R218 million (2020 – R270 million). A decrease of R22 million (2020 – increase of R2 million) has been recognised as a loss in other comprehensive income in respect of the reimbursive right.

Reconciliation of plan assets of funded obligation


	South Africa		Foreign		Total
	2021	2020	2021	2020	2021	2020
for the year ended 30 June	Rm	Rm	Rm	Rm	Rm	Rm
Fair value of plan assets at beginning of year	50 618	54 115	4 502	4 270	55 120	58 385
Movements recognised in income statement:	5 678	5 120	80	118	5 758	5 238
interest income	6 035	5 352	80	118	6 115	5 470
interest on asset limitation	(357)	(232)	—	—	(357)	(232)
Actuarial gains/(losses) recognised in other comprehensive income:	6 660	(7 481)	759	(26)	7 419	(7 507)
arising from return on plan assets	6 660	(7 481)	759	(26)	7 419	(7 507)
(excluding interest income)
Plan participant contributions*	503	504	—	—	503	504
Employer contributions*	553	1 157	53	20	606	1 177
Benefit payments	(3 341)	(2 797)	(869)	(795)	(4 210)	(3 592)
Translation of foreign operations	—	—	(793)	915	(793)	915
Fair value of plan assets at end of year	60 671	50 618	3 732	4 502	64 403	55 120
Actual return on plan assets	12 338	(2 361)	839	93	13 177	(2 268)

35Post-retirement benefit obligations continued

35.2Pension benefits Continued

Contributions, for the defined contribution section, are paid by the members and Sasol at fixed rates.

Contributions

Funding is based on actuarially determined contributions. The following table sets forth the projected pension contributions of funded obligations for the 2022 financial year.


	South Africa	Foreign
	Rm	Rm
Pension contributions	527	247

Sensitivity analysis

A sensitivity analysis is performed in order to assess how the post-retirement pension obligation would be affected by changes in the actuarial assumptions underpinning the calculation.


	South Africa		Foreign
	2021	2020	2021		2020
for the year ended 30 June	Rm	Rm	Rm		Rm
1% point change in actuarial assumptions
Increase in average salaries increase assumption	9	9	470		676
Decrease in average salaries increase assumption	(8)	(9)	(446)		(479)
Increase in the discount rate	(1 474)	(1 425)	(1 833)		(2 269)
Decrease in the discount rate	1 748	3 237	2 360		3 133
Increase in the pension increase assumption	1 821	3 309	1 353	*	1 446	*
Decrease in the pension increase assumption	(1 566)	(1 491)	(1 102)	*	(1 179)	*

This sensitivity analysis relates only to the Europe obligations as there are no automatic pension increases for the United States of America pension plan, and thus it is not one of the inputs utilised in calculating the obligation.

The sensitivities may not be representative of the actual change in the post-retirement pension obligation, as it is unlikely that the changes would occur in isolation of one another, and some of the assumptions may be correlated.