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Budget & Economy
Post-retirement medical aid realignment
Agenda #2August 20, 2026
Summary
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The Council will consider the realignment of post-retirement medical aid benefits liability to account for the actuarial adjustment as at 30 June 2026.
Post-retirement medical aid is a benefit where an employer keeps subsidising medical scheme contributions for retired staff. Under accounting standards, the employer must record that future cost as a liability before the payments are made. In South African municipalities this is usually measured under GRAP 25 (the local-government standard for employee benefits) and IAS 19. Municipalities typically commission actuarial valuations of these liabilities in line with GRAP 25 and IAS 19. The valuation is usually done annually, as at the financial year-end. The City of Cape Town's year-end is 30 June.
An actuarial valuation estimates the present value of future benefits. It can be read as the amount that should be set aside today to cover all expected post-retirement health care contributions for the current membership. The main assumptions include discount rates and participation rates. Medical cost inflation, retirement age and life expectancy also matter. When these assumptions change, or membership changes, the liability is re-measured. The "actuarial adjustment" is the resulting increase or decrease, and the City then realigns its books and provisions to match. Cape Town has previously tendered for actuarial services to compile post-employment benefit valuation reports.
The issue matters because these obligations are long-term and usually unfunded. Rising medical costs and longer lifespans can push the liability up. That affects the City's reported financial position, its budget planning and the audit of its annual financial statements. The alignment also supports transparency and compliance with the Municipal Finance Management Act's financial reporting requirements. I did not find a Cape Town–specific document for the 30 June 2026 figures, so the Council agenda and the City's annual financial statements are the best places to look for them.
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