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FAQs for Active Members of GEPF

Q: What or who is the GEPF?
A: The Government Employees Pension Fund (GEPF) is a leading independent pension fund that manages pensions and related benefits on behalf of government employees in South Africa. It is very important to note that the GEPF is not a Government institution but rather a separate juristic entity. It was established in May 1996 when the Government Employees Pension Law came into force (Proclamation/Act No.21 of 1996) following the election of South Africa’s first democratic government in April1994. The single most important characteristic of anyone wanting to understand the GEPF is that it is a defined benefit fund, meaning that the GEPF promises benefits in terms of the rules set out in the Government Employees Pension Law and these benefits are not calculated on the basis of how the fund is invested. This is important as it means that the pensions and the benefits due to members and pensioners are guaranteed in terms of the law. The only issues that matter in how members are paid, is the years of service that the members have in the GEPF and their final salary at the time they exit the fund, as these determine the amount of the pensions or pay-outs if one resigns. Thus the primary role of the GEPF is to protect the wealth of its members and pensioners, by safeguarding their retirement benefits through proper administration and prudent investment. 

Q: How successful has the GEPF been? 
A: Since its establishment in 1996, the Government Employees Pension Fund (GEPF) has grown from R 127 billion to R1.8 trillion as of 31 March 2018 , becoming Africa’s largest pension fund as well as being amongst the Top 10 pension funds in the world. It is also the largest single investor in the Johannesburg Stock Exchange (JSE), playing a critical role in South Africa’s development. It is very important to note that the GEPF as a solvency measure of 116%, implying that the GEPF’s assets, most of which are managed by the PIC, significantly exceed its obligations. In other words, the GEPF has R1.16 for every R1 it owes its retiring members. 

The Board is supported by the Principal Executive Officer and an Executive Management team.

Q: How does GEPF ensure responsible investing?
A:The GEPF approaches responsible investing by incorporating Economic, Social and Governance (ESG) issues into investment decisions. GEPF’s Responsible Investing (RI) policy is aligned to the Code for Responsible Investing in South Africa (CRISA). Responsible investing policies – including guidance on proxy voting and engagement, external frameworks and principles such as the United Nations Principles for Responsible Investment (UN PRI), South Africa’s National Development Plan (NDP) and the UN Sustainable Development Goals (SDGs) – provide guidance to the Fund. The GEPF as the asset owner, and the PIC as its asset manager, are both signatories to the UN PRI and this serves as the overarching framework for responsible investment. The chairperson of the GEPF serves on the board of the UN PRI and GEPF head of actuarial and investment serves on the UN PRI Asset Owner Advisory Committee. The GEPF has a team dedicated to the management and execution of responsible investment activities. The Board of Trustees is accountable for Responsible Investment, engaging on ESG matters at the Board sub-committees including the Investment Committee, and Social and Ethics Committee.

Q: How do we grow the funds that we are entrusted with? 
A: The focus of the GEPF is to manage our fund’s assets in a manner that meets or outperforms the fund’s current and future liabilities. This is done by providing Asset Managers such as the PIC with a mandate that outlines which type of investments can be made, the percentage allocations for each asset class, benchmarks and performance targets, among other guidelines. The allocation of the Fund between the different asset classes is set out in the table below:
Asset class Strategic asset allocation (%) Asset allocation range (%)
South African assets
Cash and money markets 4 0 – 8
Domestic bonds 31 26 - 36
Domestic property 5 3 - 7
Domestic Equity 50 45 - 55
Rest of Africa (excluding South Africa)
Africa equity 2.5 0 - 3
Africa bonds 1.5 0 - 2
Africa property 1 0 - 2
Global assets
Global bonds 2 0 - 4
Global equity 3 1 - 5
Let me stress, the PIC does not own the assets, the GEPF does. To test this, have a look at the Annual Financial Statements of the PIC, you will not see the investments of the GEPF in their statements. You will see the investments of the GEPF in the GEPF’s Annual Financial Statements. The PIC manages most of our equity, bonds, money market and property portfolios. Other asset managers manage some of our other asset classes, most of which are monitored by the PIC and our internal team. How the GEPF invests its funds is a carefully thought out strategy which is aimed at achieving long term growth for the fund. The strategy is focused on ensuring that we allocate and manage the fund assets so that it meets or outperforms the fund’s current and future liabilities, which has been done very successfully in its 22 years of existence. The GEPF has adopted a Responsible Investment policy which integrates Environmental, Social and Governance issues in all its investment decisions. The GEPF has a developmental Investment policy which focuses on targeted investments that contribute to positive economic, social and environmental outcomes for South Africa, while earning good returns for members and pensioners. As a long term investor, the GEPF understands that its success cannot be isolated from the development of South Africa. Any constraints on the South Africa’s economic growth will have a similar impact on the Fund.

Q: How does the GEPF monitor and track the investments and the Public Investment Co-operation (PIC)?
A:
The working relationship in general between the PIC and the GEPF is a normal one between an asset owner and pension fund like any other pension fund and its investment manager. Specific legislation governs it as opposed to the Pensions Fund Act. The GEPF Board and Management have put in a number of mechanisms to ensure its asset managers such as the PIC act within the mandates provided. The governance processes are contained in the Terms of Reference of the Investment Committee or the relevant Board Charters. Some of our structures and processes include Board to Board meetings, EXCO to EXCO meetings, joint and separate Investment Committee meetings, sub-committees as well as audit and risk processes.
These are structures and processes that assists in how the relationship between the GEPF and PIC is managed.
It is important to note that the PIC is mandated to make investments in both listed and unlisted assets according to its investment and governance processes, within the parameters of the GEPF mandate. 

Q: How do we deal with investment proposals?
A: The GEPF does not determine the nature and source of proposals made to it and or the PIC. The GEPF through the PIC considers proposals that are in line with its investment objectives and mandates and in the best interests of its members and pensioners.

Q: Where does the Government Pensions Administration Agency (GPAA) fit in?
A:  Like the majority of private sector pension funds, the GEPF does not carry out its own administration activities. Rather, it is administered by GPAA. GPAA is a government component that reports to the Minister of Finance. Its responsibility is to administer funds and benefits on behalf of the GEPF and National Treasury. The relationship with the GEPF is managed by a Service Level Agreement.

Q: What benefits does GEPF offer to members? 
A: The GEPF provides:
• Benefits for normal, early, late retirement and ill health retirement
• Benefits for members affected by retrenchment/ restructuring
• Funeral benefits

Q: How does GEPF ensure members’ and pensioners’ best interests? 
A: • The GEPF Board of Trustees keeps a close eye on how Asset Managers such as the Public Investment Corporation and others invests GEPF funds and makes sure that all investments are in the best interest of members and pensioners. The board consists of 16 members; 8 represent government (the employer) and 8 represent members and pensioners.
• Through representatives on the board, GEPF members have a direct say in important decisions such as: a) decide on the annual increase paid to pensioners; b) ensure the GEPF finances are properly audited and reported on; c) decide on how funds should be invested.
• Benefits are defined in the GEP Law and Rules and are therefore guaranteed.
• Benefits are protected against inflation. According to GEPF rules, the annual pension increase paid to our members must be at least 75% of the average increase in consumer inflation during the previous year. Where pensions fall behind inflation, we also pay catch-up pension increases.

Q: What does ‘developmental mandate’ mean and how much does GEPF allocate towards developmental investment? 
A: ‘Developmental mandate’ refers to investments that deliver both financial and social returns. GEPF has a Developmental Investment Policy (DI) and sets aside 5% of the total portfolio for developmental investments. Through developmental investments, the GEPF plays an important role in addressing many of the pressing economic, social and environmental challenges such as growth, unemployment and inequality.  

Q: Who manages GEPF investments? 
A: The investments of the GEPF are managed primarily by the Public Investment Corporation (PIC). The PIC, in terms of its mandate also appoints external asset managers to manage part of the portfolio. The full list is available on the annual report.

Q: What type of fund is GEPF?
A:
The GEPF is a defined benefit fund. This means that the benefits are defined in the rules of the fund, therefore the benefits are guaranteed – they don’t depend on how much the member and employer have contributed. 

Q:When was GEPF established, by whom and for what purpose? 
A: GEPF was established in 1996 in terms of the GEP Act No 21 of 1996. In terms of Income Tax Act No 56 of 1962, GEPF is classified as a pension fund established by law.

Q: How many members does GEPF have at present? 
A: 1 273 125 active members as at 31 March 2018.

Q: How many GEPF pensioners draw monthly? 
A: 450 322 pensioners and beneficiaries as at 31 March 2018 

Q: What is a Child’s Pension? 
A: When a GEPF member dies, the GEPF pays a monthly pension to his/her young children – this is called child pension. We pay child pension to the children of our deceased members – from birth to 22 years old.

Q: Why and what are our Investments in Africa? 
A: The GEPF makes its investments with the objective of earning financial returns, as well as social returns for the benefit of its members. To achieve this, the Fund has set aside 5% of the total portfolio for developmental investments, which are invested in South Africa and Africa. Through these investments, the GEPF plays an important role in addressing many of the pressing social and environmental challenges of our time. The GEPF committed USD 250 million to the Pan African Infrastructure Development Fund (PAIDF) in 2009. PAIDF raised USD 630 million from ten investors, including the GEPF. PAIDF has a 15-year term and the investment has generated realised and unrealised proceeds to date. PAIDF is invested in Power and Energy, Telecommunications and Transportation infrastructure projects across Africa. PAIDF II was a follow-on investment to PAIDF, to which the GEPF committed USD 350 million in 2015. PAIDF II is a 12-year USD denominated fund which also finances infrastructure projects in Africa. The fund targets investments in Power and Energy, Transportation, Telecommunications, Water and Sanitation, and Health. The GEPF follows specific approval and governance processes to approve such investments and requests for draw-downs on the committed funds.

Q: Does the GEPF oppose the disclosure of investments? 
A: The GEPF does not oppose the disclosure of investments concluded on its behalf. The GEPF supports disclosure but that such disclosure must be made by asset owner which in this case is the GEPF and not the PIC as the asset manager. The GEPF has been saying that the legislating disclosure is not necessary as it is already happening. The only issue is the extent which so far has been limited by the size of the paper Annual Report and Annual Financial Statements. The GEPF has already made full disclosure electronically and will continue to do so.  

Q: Alleged of mismanagement by certain stakeholders. What are our views? 
A: The Government Employees Pension Fund (GEPF) is very concerned about the statements made by such groupings with respect to allegations of poor mismanagement of funds and we reject these allegations outright. These statements we believe are irresponsible as they create unnecessary anxiety amongst our members and pensioners which often leads to members and pensioners resigning and thus creating financial hardship, often having insufficient funds when they retire. How the GEPF invests its funds is a carefully thought out strategy which is aimed at achieving long term growth for the fund. The strategy is focused on ensuring that we allocate and manage the fund’s assets so that it meets or outperforms the Fund’s current and future liabilities, which has been done very successfully in its 22 years of existence. The GEPF has adopted a Responsible Investment policy which integrates Environmental, Social and Governance issues in all its investment decisions. The GEPF has a developmental Investment policy which focuses on targeted investments that contribute to positive economic, social and environmental outcomes for South Africa, while earning good returns for members and pensioners. As a long term investor and a defined benefit pension fund whose investment strategy has been designed, taking long-term objectives into account, using a liability driven approach after an extensive asset liability modelling exercise. We would like to stress that the GEPF’s investment returns are highly correlated with growth in the South African economy. If the South African economy does not grow the GEPF’s investments do not grow. The GEPF has allocated a large portion of its assets to local listed assets, as per the investment policy statement for the benefit of the economy that all South Africans depend on. Due to the nature of the GEPF’s size, its performance is directly linked to the performance of local listed markets. The GEPF regularly reviews its investments to achieve appropriate diversification. The cash flow problems identified by stakeholders such as the AMAGP in their report are due to increases in resignation whilst the membership has not been increasing over the past five years. These resignations are in respect of members who have been with the GEPF for a long time, most of the time when members are close to retirement they resign as their pay-outs are quiet substantial. This is partly as a result of entities that masquerade as champions of members and pensioners but instead sow distrust of the GEPF leading to them prematurely and/or unadvisedly taking their pension benefits out of the fund. It is also important to realise that the cash flows of a pension fund are very different from those of an ordinary business. A pension fund exists to pay benefits. As a pension fund matures, i.e. it has older members with long service and there are significantly more pensioners than contributing members, benefit payments will exceed contributions. The Board and Management of the GEPF take their fiduciary responsibilities seriously and at all times act in the best interests of its members, pensioners and beneficiaries. The GEPF is guided and operates within the Government Employee Pension (GEP) Law and Rules which defines precisely how the Fund should be governed and how it should administer pension and other related benefits to members, pensioners and beneficiaries. Every four years the employer, employees and pensioners have the scope to constitute a new Board. Pensioners had the opportunity to again elect a pensioner trustee and substitute trustee that they believe are competent to serve in these roles. It is indeed unfortunate that some stakeholders continuously criticize those trustees that have been duly elected and appointed. 

Q: What steps have been taken to address problems at the PIC? 
A: The President Ramaphosa has appointed a commission of enquiry to investigate the allegations made against the PIC and its management. The GEPF looks forward to the findings of the inquiry as it believes that the PIC must be an institution of the highest integrity and governance standards. 

Q: Is the GEPF concerned about the issues at the PIC? 
A: Yes, the revelations have concerned the Board and Management of the GEPF. We have been in constant contact and engagement with the PIC. It is important to understand that we deal with the PIC as an institution as well as the structures it has in place to manage our funds. At the moment we are comfortable with the governance structures that we have put in place. We have no reason to doubt the sincerity and commitment to clean governance as outlined by the management of the PIC to the GEPF. This being said, we were surprised by the revelations with respect to the VBS Bank. We have indicated to the PIC that the full might of the law must be brought on all guilty parties. The GEPF is concerned about the developments that have come to light since the commencement of the VBS enquiry, and more so that two of PIC’s former employees have been implicated of impropriety in their personal capacity. 

Q: Are you aware of the correspondence between the UDM and Minister with respect to the PIC? 
A: The GEPF has not been privy to the correspondence between the UDM and the Minister of Finance with respect to the PIC other than what has been covered in the media. It is important that we note that the PIC is a corporation whose sole shareholder is the Minister of Finance, with its own Board and governance structures. It is the prerogative of the Board to investigate any allegations against the organisation, including those against the CEO. The shareholder has the prerogative to ask the Board of its entity to investigate any allegations against it and take any action it deems fit in this regard. The GEPF respects this. 

Q: Understanding our investment in VBS
A: The Government Employees Pension Fund (GEPF) inherited its shareholding in VBS from Government Pension Fund of Venda, after the discontinuation and amalgamation of the latter into GEPF in terms of the Government Employees Pension Law of 1996. Further investment in VBS bank was made in 2002 as part of the PIC’s Isibaya Fund portfolio, which focuses on unlisted investments. The investment was approved after a thorough investment evaluation process and due diligence process by the investment management team. It is important to understand that the reason why VBS was created was a noble idea. It provided home loans to individuals that did not have title deeds, i.e. those individuals that live on Trust and Community land.

Q:  Is it true that the GEPF is considering converting ESKOM’s bonds to Equity?
A:  With regard to Eskom the GEPF has not taken any decision to convert its bond exposure into equity.

Q:  Fighting Crime?
A: The Government Employees Pension Fund (GEPF) has become aware of individuals falsely posing as agents or officials of the Government Employees Pension Fund who are charging a fee to assist members, pensioners and beneficiaries to claim outstanding funds. The public and especially members, pensioners and beneficiaries should note that the GEPF deals directly with its clients and does not charge for its services nor does it endorse agents, companies or any third party individuals to act on its behalf.
Anyone who requests payment for rendering GEPF services is committing fraud and the public is urged to report such individuals or companies to the South African Police Service.
The GEPF would, therefore, like to make its members, pensioners, beneficiaries and their families aware of the following:
• The GEPF services are FREE
• No one is allowed to ask for a fee to assist GEPF current and former members, pensioners, beneficiaries and their families with respect to any GEPF provided services
• Do not share your personal information such identity document number and bank account details. 

Q: Why does a member incur a debt with interest in a case of a divorce?
A: Currently the GEPF create a ‘debt’ in the member’s account equal to the amount of pension interest paid by the GEPF to the former spouse in terms of the Divorce Order. At the time the payment is made to the former spouse, no pension benefit has accrued to the member which can be paid to the former spouse. Because there is no pension benefit which has accrued to the member, the GEPF is in fact paying the former spouse on behalf of the member. Because the GEPF is making the payment on behalf of the member, it needs to recover the amount from the member. If the GEPF were not to recover the amount it would result in the GEPF actually paying the member’s former spouse with the money belonging to the other members of the GEPF.

Q: When is the divorce rule going to be amended?
A: The GEPF considered the complaints about the divorce debt approach and has approved that the debt approach be replaced with the service reduction approach. In order to do so the Law must be changed and this is a parliamentary process. The proposed Law amendments are currently in process in Parliament. Once this process has been finalised by Parliament, we will come back to you to inform you on how exactly it’s going to work and from when the service reduction approach will become effective.

Q: Why is GEPF not loaning money to members? 
A: The GEPF receives a lot of enquiries from active members and pensioners about the possibility of getting cash loans from the Fund. The GEP Law does not make provisions for loans to members as the Fund is not a registered Financial Service Provider. It will therefore be against the law to allow loans from the GEPF. 

Q: When is the historical exclusions (PDP’s) going to be addressed?
A: The Past Discriminatory Practices matter is currently serving at the PSCBC for final adoption and resolution on implementation. Once resolution in this regard has been reached between the parties to the PSCBC, it will be implemented.

Q: Why is it that the GEP law allows for early retirement / resignations but imposes penalties when such is invoked? 
A: There is no penalty that is invoked in the case of resignation. When you resign you become entitled to a pension benefit which is equal to your actuarial interest in the Fund. In the case of early retirement a penalty is imposed and this is to take account of the fact that your pension is being paid for a longer period than it would have been paid had you retired at normal retirement age. 

Q: Why is the medical subsidy received by some pensioners and not all pensioners?
A: There are qualifying criteria’s with respect to receiving a medical subsidy. The criteria is determined in PSCBC Resolution 2 of 2015. In terms of the Resolution the employer shall continue to provide medical assistance if the employee:-
• Exited or exits the Public Service because of Retirement (including early retirement), death or dismissal on account of incapacity due to ill health or injury;
• Has attained at least fifty(50) year of age;
• Has at least fifteen (15) years of actual service; and
• Remained a principal member of a registered medical scheme for twelve (12) months immediately before the date he/she exited or exits the public service.

Why does the GEPF invest in SOE’s like Eskom, SANRAL etc?

Q: Is our pension safe with the GEPF?
A: The GEPF is a R1.8 trillion Fund making us the largest pension fund in Africa and the single largest investor in the Johannesburg Stock Exchange-listed (JSE) companies. The GEPF adheres to strict regulations in governing its financial liability to members, beneficiaries and pensioners. The GEPF’s investment strategy also uses a liability-driven approach that takes into consideration expected future benefit payments, the actuarial position, and other long-term objectives, as well as the risk to the overall solvency of the Fund. The single most important characteristic of anyone wanting to understand the GEPF, is that it is a defined benefit fund, meaning that the GEPF promises benefits in terms of the rules set out in the Government Employees Pension Law and these benefits are not calculated on the basis of how the fund has invested. The pensions and the benefits due to members and pensioners are guaranteed in terms of the law. The only issues that matter in how members are paid, is the years of service that the members have in the GEPF and their average final salary at the time they exit the fund as these determine the amount of the pensions or pay-outs if one resigns. Therefore, your monies and benefits are safe with the GEPF.

Q: Is the GEPF about to go bankrupt? 
A: In 1996 the GEPF had 72% minimum funding level and has grown to 115% funding level.. This means that the GEPF has got R1,15 for every R1 it owes its members and pensioners and this cannot be the sign of the organisation that is performing badly or about to go bankrupt.

Q:As the GEPF members, we are flooded by financial advisors encouraging us to leave the GEPF because other funds are more lucrative than the GEPF. How true is this? 
A: It is not true. The Government Employees Pension Fund (GEPF) has got over 1.2 million active members, more than 400 000 pensioners and beneficiaries and assets of more than R1.8 trillion. This makes the GEPF one of Africa’s largest pension fund, thus sustainable for a foreseeable future. It is governed by law (GEP Law Proclamation 21 of 1996) which determines what kinds of benefits members are entitled to, how to pay those benefits, how to invest to safeguard members’ pension. This guarantees that benefits are paid out efficiently, accurately and on time, while the funds are invested responsibly and are accounted for. GEPF is a defined pension fund, which means the members’ benefits are guaranteed and do not depend on the overall investment performance. This gives its members and pensioners peace of mind about their financial security after retirement. Its benefits are protected against inflation. For example, according to the fund rules, the annual pension increase to GEPF pensioners must be at least 75% of the average increase in consumer inflation during 01st December – 30th November of the previous year. When pension fall behind inflation, GEPF pays catch – up pension increases to the affected pensioners. The GEPF also offer non – contributory benefits which members do not contribute for, like the funeral benefit, spouse pension and orphans pension. Both members and pensioners can claim for a funeral benefit while the spouse pension is for life, meaning that as long as the lawful recipient is alive, he / she will receive the benefit until they pass on. All the above – mentioned benefits are not offered by any other Fund, therefore there is no reasons to leave the GEPF and join other funds

Q: Why are we being taxed while working (salaries) and even when we withdraw our pension benefits? 
A: The South African Revenue Services (SARS) taxes all forms of income including pension benefits. The Income Tax Act 58 of 1962, prescribes the basis on which pension benefits must be taxed. The taxation for pension benefits on the mode of exit from the pension fund, namely; • Withdrawal,
• Retirement , Death or Severance Benefits
Depending on the mode of exit the applicable tax tables as prescribed by SARS is applicable.

Q: How far is the GEPF in creating housing opportunities for GEPF members and when is the scheme going to start?
 

A: The GEPF has partnered with South African Homes Loans (SA Home Loans) to make home ownership a reality for more GEPF members. Of importance and beneficial to members is that SA Home Loans have adjusted the qualification requirements for home loans so as to enable more members to qualify, while ensuring that every approved home loan is affordable in terms of the law. It is hoped that this partnership between the GEPF and SA Home Loans would make the process of owning a home for our members a simpler and less stressful experience. For more information on how to apply you can visit any SA home loan offices to get assistance

Q:  How are the annual increments determined on monthly pension?
 
A: GEPF is governed by the Government Employees Pension (GEP) Law of 1996, as amended, and the rules that accompany it. These rules, along with GEPF's Pension Increase and Funding Level policies, give firm guidelines on how the Fund must decide the annual increase that is paid to pensioners. These documents state that GEPF's Board of Trustees (the Board) may approve a pension increase if, after the increase has been granted. This minimum funding level states that the Fund's assets must be able to cover at least 90% of its liabilities. This means that what the Fund owns (its assets) must be able to cover the cost of at least 90% of what it owes in terms of the current and future pension payments that it is committed to pay (its liabilities). According to the rules, the Fund may thus only approve an increase that is affordable when all the aforementioned factors are taken into account.

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