Joint Update by Transnet, the TSDBF and the TTPF to the Portfolio Committee on Public Enterprises 18 June 2013 2 PAGE Agenda Background Transnet SOC Ltd activities Transnet Second Defined Benefit Fund activities Transnet Sub Fund: Transport Pension Fund activities Enhanced pensioner benefits Conclusion Recap of our November 2011 final position to Parliamentary Committee 3 PAGE Background On 25 November 2011, the Trustees of the Transnet Second Defined Benefit Fund(TSDBF) and the Transnet Sub Fund of the Transport Pension Fund (TTPF) (the Funds), together with Transnet SOC Ltd (Transnet) presented a joint proposal to the Portfolio Committee on Public Enterprises, which was noted. This presentation today, provides a high-level summary of activities since November 2011 by the Funds and Transnet. 4 PAGE Recap of our November 2011 final position to Portfolio Committee Payment of 5 months pension Benefit improvements using current bonus rules to equate/ exceed annual CPI levels Rule amendment to provide for future increases in addition to the current 2%, if affordable and approved by the Funds and Transnet; Ministerial approval in progress Transnet, the TSDBF and TTPF have met the commitments made in their final proposal to the Portfolio Committee. 5 PAGE Transnet SOC Ltd activities since 11/2011 Approved the various ad hoc bonus proposals made by the TSDBF and TTPF. Transnet made an ex gratia payment to the most disadvantaged pensioners of both the TSDBF and TTPF, amounting to R143 million during October Provision for a further ex gratia payment of R70 million has also been made for payment in September Transnet Board of Directors supported and recommended proposed rule amendment to DPE for the granting of additional future pension increases (over and above the statutory 2%) if Funds can afford. 6 PAGE Transnet Second Defined Benefit Fund activities since 11/2011 Improved Communications: Regional Meetings, Newsletters, Personal Data Update Competition. Rule change in process to grant additional pension increases. Ad hoc bonus payments Payment monthBonus Payment amountCost to fund December % of annual pensionR197 million February % of annual pensionR165 million February % of annual pensionR165 million November % of annual pensionR162 million April % of annual pensionR160 million 7 PAGE Transnet Sub Fund activities since 11/2011 Pensioner elections have recently been held, following a rule amendment in this regard, and allowing for greater representation by pensioners on the TTPF Board of Trustees. Improved Communications: Personal Data Update Competition. Rule change in process to grant additional pension increases. Ad hoc bonus payments Payment monthPayment amountCost to fund December % % of annual pension pro-rated R89 million November % of annual pensionR16.3 million June % of annual pensionR16.3 million 8 PAGE Enhanced Pensioner Benefits: 2008 to 2013 TSDBF increases (2%+Bonus) ,8% ,3% ,5% ,5% ,3% ,7% TSDBF % annual benefitCPI TTPF increases (2%+Bonus ) ,3% ,3% ,0% ,0% ,0% ,0% TTPF % annual benefit CPI The bonus payments continue to supplement the current statutory increase of the beneficiaries of the Transport Pension fund: Transnet Sub- fund: (TTPF) and Transnet Second Defined Benefit Fund (TSDBF) to provide pensioners with effective increases above CPI. This has resulted in the beneficiaries of the TSDBF and TTPF receiving pension cash flows equal or greater than 75% inflation since the payment of ad hoc bonuses was introduced. Ex-gratia payments to the poorest pensioners (R million) Sep-08 ProvisionOct-12Jul-10Jul-07 Transnet made an ex gratia payment to its most disadvantaged pensioners amounting to R143 million during October Provision for a further ex gratia payment of R70 million during 2014 has also been made. 9 PAGE TSDBF illustration of Pensioner Benefits: 2008 to 2013 TSDBF increases (2%+Bonus) /14 YTD 10,3% 2012/13 10,3% 2011/12 28,7% 2010/11 18,8% 2009/10 17,3% 2008/09 10,5% 2007/08 3,5% TSDBF % annual benefitCPI The above data has been converted into a practical example below, using a base pension of R per annum (2006/07) and comparing the actual cash flows to cash flows equivalent to 75% of CPI vesting increases 55,000 50,000 40,000 35,000 20,000 25,000 30,000 45,000 15,000 10, /14 YTD 17,230 3, /13 38,203 5, /09 37,454 3, /08 36,720 6,558 38, /11 10,601 39, /12 3,377 40, /10 2% IncreaseBonus portionCPI Equivalent CPI Equivalent 2% + Bonus 248,865 33,572 Cumulative 282, , % 17,230 3,445 40,542 3,377 39,747 10,601 38,968 6,558 38,203 5,857 37,454 3,184 36, ,865 33,572 10 PAGE TTPF illustration of Pensioner Benefits: 2008 to 2013 TTPF increases (2%+Bonus) ,3% 2012/13 10,3% 2011/12 85,3% 2010/11 2,0% 2009/10 2,0% 2008/09 2,0% 2007/08 2,0% 2013/14 YTD TSDBF % annual benefitCPI The above data has been converted into a practical example below, using a base pension of R per annum (2006/07) and comparing the actual cash flows to cash flows equivalent to 75% of CPI vesting increases 50,000 40,000 30,000 20,000 10,000 70,000 60,000 80, /10 38, /09 37, /08 36, /14 YTD 17, /13 40, /12 39,747 33, /11 38,968 2% IncreaseBonus portionCPI Equivalent 39, ,865 CPI Equivalent 2% + Bonus Cumulative +2.0% 288, ,230 17,230 3,432 40,542 3,365 39,747 33,121 38,968 38,203 37, ,865 39,918 36,720 11 PAGE Conclusion Total ad hoc bonuses paid by TSDBF and TTPF from November 2011 to date amount to R863 million and R122 million respectively. In addition, Transnet made an ex gratia payment to the Funds most disadvantaged pensioners of R143 million in October 2012, and have provided for a further payment amounting to R70 million during 2013/14 for payment in September The Trustees of the Funds will continue to approve (with the concurrence of the employer) ad hoc bonuses, subject to ensuring the Funds remain financially sustainable. Once the proposed rule changes are approved and gazetted, the Funds will be in a position to consider granting additional (vesting) pension increases, subject to affordability.