shares, property, etc
needed to fund the "promise"or "Actuarial Liability"
transfers in the1990s left billions of Rand surplus ......why?
Board estimated R80 Billion surpluses in Pension Industry in 1999)
... now there
is a shortfall in pension funding!
A quotation from
Jeremy Andrew, Chief Actuary of the Financial Services Board in 2000:
“Seldom were members given the
benefit of any provision held within the fund to protect the
fund against a fall in the stockmarket,
or of any actuarial surplus.”
“There was a lack of understanding
on the part of the members and their trade unions of how defined
benefit funds were financed. In particular, the union
negotiators may not have appreciated that a provision against the possibility of a fall in the
stockmarket may have existed on top of the declared
– The Investment Reserve was not “on top of the declared surplus” –
this reserve/provision forms part of the Actuarial Reserve value as
defined by Regulation 15 of the Pension Funds Act.
Quotation from Pension Funds Second
Amendments Bill 2001 - Annexure A
the benefit of hindsight it was not fair to have given transferring or
retrenched members no share of this provision against a fall in the
In many Defined Benefit Pension Funds, members were
promised their full value in the Fund on transfer to a "Money Purchase
Pension Scheme" .
Then, after the members agreed to
transfer, the actuary changed the assumptions relating to the "Investment
Reserve" and reduced the transfer value - anywhere between 10% and 40%
This explains how a large portion
of the surpluses in Defined Benefit Pension Funds were derived - an
estimated R80 Billion in 1999.
Government, in its Pension Funds
Second Amendment Bill of 2001, claims it was
"not fair" to members to have
left behind this "investment reserve"
"While we may be able to reach agreement with all
stakeholders on the way forward, redressing inequities of
the past is fraught with difficulty and opposition."
In some Funds, once the
transferring members left the Fund, the actuary reverted to the original and
stronger valuation method for the remaining members, many of whom were
trustees of the Funds.
In some Funds, the Trustees
agreeing to this method of transferring funds were shareholders in the
company and benefited financially from this decision. The questions must be
- In such cases, were the
trustees acting legally in the best interests of their members?
- Is there a possibility that
there may be a conflict of interest?
- Why did the media drop the
story after Government publically acknowledge that it was not fair to
Link to: "The Actuary" -
magazine of the British Actuarial Society
or members' reserves
"Back Issues" - "November 2000" - Roger Wellsted
Back Issues - January 2001
Employers' surpluses or
Link to Nedlac Negotiations