Presentationto

Portfolio Committee on Finance:

Pension Fund 2nd Amendment Bill

• Mike Codron, President

• Joubert Ferreira, President - Elect

• Andre Pienaar Council Member and Convener of Retirement Matters Sub-Committee

• Wim Els, Executive Director

ACTUARIAL SOCIETY OF SOUTH AFRICA

COMMITTEE WHO PREPARED THE ASSA SUBMISSION

• Colin Southey (Convenor)

• Blignault Gouws

• Anthony Asher

• Andre Pienaar

• Stephen Handler

• 450 members in South Africa• Pension Funds Act requires a

valuator (who must be an actuary) to:– Certify soundness of rules– Calculate liabilities – Certify transfers

• New Act will make work for actuaries

ACTUARIAL SOCIETY OF SOUTH AFRICA

HISTORY TO 1980

• Defined benefit funds initiated by employers, who took investment risk

• High inflation from mid-seventies eroded value of withdrawal benefits and pensions

• Poor investment returns meant no surpluses

• Preservation legislation prevented by strikes

• Excellent equity returns created significant surpluses

• Benefit increases not uniformly applied nor regulated

HISTORY - 1980’S

PROGRESSION OF SURPLUSES

N o t ion a l F u n d in g L ev e l

0

2 0

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

1 6 0

HISTORY IN 1990’S

• Poorer investment returns

• Transfer to money purchase funds

• Negotiation around surpluses,

transfers and pension increases

from 1993

AGREEMENT WITH BILL

• Ownership of surpluses must be clear

• Pensioners should be protected

against inflation when affordable

• Transfer values should give fair value

• Do suspect some unfair transfers

DISAGREEMENT WITH BILL

• Withdrawals should also represent fair value as should retirement, deaths and disabilities

• Actuaries cannot certify equity

• Timetable is too tight

• Must be clear what are reserves and what is surplus

• Employers’ surpluses should be available to creditors

• Do not think tribunal should necessarily include an actuary

CONCERNS WITH BILL AND REGULATIONS

• Redressing the past• Not clear on

– previous benefits to senior management– what can go to a contingency reserve

• Sharing surplus on past contributions - non-contributory funds

• Needs much time to study and comment.6 September to early

CLOSE

• Welcome the Bill

• Administration will take time

• Would like to have opportunity

to check for details