What or who is the GEPF?

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. 

How successful has the GEPF been?

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.

How does GEPF ensure responsible investing?

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.

How do we grow the funds that we are entrusted with?

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.

How does the GEPF monitor and track the investments and the Public Investment Co-operation (PIC)?

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. 

How do we deal with investment proposals?

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.

Where does the Government Pensions Administration Agency (GPAA) fit in?

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. 

What benefits does GEPF offer to members?

 The GEPF provides:
• Benefits for normal, early, late retirement and ill health retirement
• Benefits for members affected by retrenchment/ restructuring
• Funeral benefits 

How does GEPF ensure members’ and pensioners’ best interests?

• 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. 

What does ‘developmental mandate’ mean and how much does GEPF allocate towards developmental investment?

‘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.  

Who manages GEPF investments?

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.

What type of fund is GEPF?

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. 

When was GEPF established, by whom and for what purpose?

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.

FAQ on new Divorce Law

GEPF change rules regarding pension debt on divorce 

Following the gazetting of the Financial Matters Amendment Act, 2019 on 23 May 2019, the Government Employees Pension Fund (GEPF) will, once the amended rules are implemented, no longer be subjecting members to a debt model in executing divorce orders. Instead, the new law amendment provides for the reduction of pensionable service years of GEPF members to take into account the amount paid to a former spouse in terms of the divorce order. 

This amendment to the law removes the notional pension debt concept that accrued to the GEPF member when a portion of their pension was paid out by the GEPF as a divorce settlement. 

The new amendment now ensures that rather than creating a debt, there will be an adjustment to the member’s pensionable service years following the payment of a divorce settlement by the GEPF. This means that the benefit that will be paid to the member upon exiting the GEPF will now be decreased by reducing the members’ years of pensionable service to take into account the pension amount that was paid to the spouse upon divorce. 

It is important to note that members will still receive their benefit entitlement after the reduced pensionable service has been effected, that is their benefit will be calculated on the adjusted pensionable service. Members who retire and have more than ten years of pensionable service will still be entitled to a lump sum and a monthly pension upon existing the fund, however they will receive this based on reduced value in line with their reduced years of service. 

Following this law change, the GEPF is currently developing and gazetting rules that will govern the implementation. It is expected that this process will be finalised in July 2019 and the implementation of the new rules will come into effect as of 01 August 2019.

The Law amendment also allows for a transitional measure. This entails that members who already had divorce settlements processed in terms of the current applicable notional debt approach, have a period of 12 months within which to notify the GEPF whether they wish to remain on the notional debt approach or whether they wish to convert to the service adjustment model.  The GEPF will be sending communication to all affected GEPF members from August

 2019 onwards to inform them about their options and how these changes are going to affect their pensionable service periods and benefits. Such affected members will have the opportunity to opt out of the old divorce notional debt approach into the new service reduction model. 

The affected members whose benefits are calculated on the basis of the notional debt approach will have up until the 22 May 2020 to indicate their choice to either remain with the notional debt approach or to move to the service adjustment approach. Affected members who fail to indicate their choice by 22 May 2020 will automatically be converted into the new approach that is their benefits will be determined based on a reduction of their pensionable service and not application of the notional debt. 

QUESTIONS AND ANSWERS FOR THE RULE CHANGE ON DIVORCE

What is Clean Break service adjustment approach?

The Clean Break service adjustment is the approach that the GEPF will apply when a portion of a member’s pension interest is paid to a former spouse in terms of a Decree of Divorce. In terms of this approach, the member’s pensionable service period will be reduced to take into account the fact that the Fund has paid out a portion of member’s pension benefits earlier than when the member exits the Fund. 

Why is GEPF applying this method and who approved it?

This new approach is being implemented following concerns raised by members that the previous notional debt approach impacted them negatively. This new approach was gazetted on the 23 May 2019 as part of the Financial Matters Amendment Act, 2019. It was approved by the Board of Trustees of the GEPF as well as by members and the employer through a resolution of the Public Service Coordinating Bargaining Council (PSCBC). This new approach will make it easier for a member to predict their pension benefits upon exit.  

What exactly is going to happen when a member divorces and a spouse claims against their pension?

In terms of the service reduction approach, a member’s pensionable service will be reduced to take into account the amount paid to the ex-spouse. The amount paid to the ex-spouse as per the divorce order will, on the advice of the actuary, be converted to pensionable service years and the member’s pensionable service years will be reduced accordingly. 

When the divorced member exits the Fund, their benefit will be calculated on the reduced pensionable service years. It is however important to note that the Fund will still recognise the actual pensionable service years of the member (before the reduction but not for purposes of calculating the benefit) and the member will remain entitled to the nature of the pension benefits based on their actual pensionable service years. This means if the member is entitled to a gratuity and an annuity based on actual service years, they will still be entitled to a gratuity and annuity but it will be calculated on the reduced pensionable service.

The GEPF is currently developing the GEPF rules that will govern the implementation, following the law change. It is expected that this process will be finalised in July 2019 and the implementation of the new service reduction rules will come into effect as of 01 August 2019. This means that as of 1 August 2019 the service reduction model will be used for all divorce orders granted after 01 August 2019 where the GEPF is ordered to effect payment of a portion of the pension interest to an ex-spouse. 

Is the new law different from the previous practice of debt?

Yes, once the GEPF implements the service reduction approach, all future divorces granted after such date that is subject to clean break will be processed in terms of the service reduction approach. For such divorces no notional debt will be recorded against the member’s pension record. The member’s pensionable service will automatically be reduced equivalent to the amount paid to the ex-spouse as per the divorce order. 

What are the advantages of the service adjustment approach to members?

It allows for greater certainty for members in respect of their eventual pension benefits on exit as it is easier for members to estimate their pension benefits on exit. 

When does it start and end?

The new approach will be effective as of 1 August 2019. Implementation will be subject to the rules of the GEPF being amended and the administration systems being configured to accommodate the change in approach. 

Does this change recognize divorce in cases of a customary marriage?

Yes, if all legal requirements are met

What happens to those members who were affected by the old debt approach? Can they convert to the new service reduction approach?

The amendment to the GEP Law, 1996, and rules provide for a transitional measure. This means that the law amendment allows for the following: 

Members who had payments of pension interest upon divorce prior to the implementation of the service reduction approach have a period of 12 months within which to notify the GEPF whether they wish for the reduction of their pension benefit to be dealt with in terms of the debt approach or as per the amended legislation i.e. the service reduction approach.

If such members do not notify the GEPF of their choice within the 12-month period, the reduction will automatically be dealt with in terms of the amended legislation, namely the service reduction approach. Such members are given an option to switch from the debt approach to the service reduction approach or to remain on the debt approach. The Fund will contact all the affected members and provide them with the different options.  

How do I stop the debt repayments on my salary as I convert to service adjustment approach? 

You will have to contact your employer to stop this deduction. 

Is it legal for GEPF to pay my ex-spouse from my pension?

Yes. The Fund is merely giving effect to the court order based on the provisions of the divorce between the parties. 

Does GEPF need my permission before paying my ex-spouse/partner? Can I refuse?

No. The court orders the Fund by the Decrees of Divorce to pay ex-spouses and the Fund is compelled to comply with the order. 

What will happen if the service adjustment approach leads to my retiring without qualifying for pensionable period or post-retirement medical subsidy? How will this work?

The Fund will still carry the actual service of a member and a member may still qualify for their post-retirement medical subsidy based on the actual service. The Service Reduction approach will not affect the qualification or not for post-retirement medical subsidy and will affect the calculation of their pension benefit only. 

How does divorce affect my benefit?

Members who are in the process of a divorce must take note of the financial implications on their pensions, in the event they have agreed to share their pensions with their former spouses.

Once the GEPF receives a divorce decree that indicates that the divorcing parties have agreed or been ordered to a division of pension, the Fund has to honour the court order by paying the former spouse as agreed by both parties or ordered by the court.

The amount paid out to the former spouse will affect the member’s pension as follows:

  • Reduced pensionable service period; 
  • Reduced pension benefit amount based on the reduced pensionable service period.

Because the GEPF is a defined benefit fund, contributing members do not have their individual allocation of money in the form of personal accounts. As members contribute, the contribution gets into a pool of contributions and a benefit is calculated by applying a formula that determines how much the exiting member is entitled to.

In the event of a divorce where the parties have agreed to share their pensions, the GEPF member should be aware that the former spouse will be paid a share of the pension. 

The recent amendment to the clean break principle states that divorced members are no longer required to pay back the amount that would be payable to the former spouse. Their pensionable years of service are instead reduced commensurate with the portion paid to the former spouse as per the divorce decree.

The GEPF has moved from the “notional debt” approach to a service reduction approach for divorced members. This means that after the former spouse has been paid, the member’s service period will be reduced with the number of pensionable service years to take into account the amount that was paid to the former spouse. 

How and when does the claiming process of a divorce benefit start?

The claims process can begin any time after the divorce has been finalised. The GEPF must be provided with the divorce decree, which indicates the portion of the pension that is payable to the former spouse. 

The following documents must be submitted for payment to the GEPF by a former spouse who is a member:

  • A completed Choice Form
  • A certified copy of ID
  • A certified copy of document proof of tax number
  • Certified copy of the Divorce decree

A letter of executorship will have to be provided by the member in the event the former spouse has passed away. The letter should be in the name of the late non-member former spouse. Other important documents to be submitted are the late former spouse’s:

  • Certified ID (including that of the executor)
  • Completed bank form (Z894) (for estate)
  • Tax number
  • Certified copy of the Divorce decree

Actuarial Interest Factors

What is Actuarial Interest?

Actuarial Interest is very simply the estimated value of each member’s benefits in the GEPF at any point in time or, put another way, the amount estimated by the GEPF to be sufficient to pay the member’s benefits when he/she subsequently leaves the GEPF.

Payment of Actuarial Interest to a member who exits the GEPF is thus fair and reasonable in respect of thebenefits that the member has built up in the GEPF.

What are Actuarial Interest Factors?

Actuarial Interest Factors are tables of mathematical functions used for calculating the member’s estimated value in the GEPF. These tables are calculated by the Actuary of the Fund using both demographic and economic assumptions.

Why does the GEPF use Actuarial Interest Factors?

The GEPF uses Actuarial Interest Factors to calculate benefits payable to members who are owed Actuarial Interest on exit.

How often are Actuarial Interest Factors changed?

Actuarial Interest Factorschange with every actuarial valuation. The GEPF carries out an actuarial valuation every 2 years.

What makes the Actuarial Interest Factors change?

Actuarial Interest Factors depend on demographic assumptions (e.g. life expectancy, rates of ill-health retirement, etc.) and economic assumptions (e.g. future investment returns, and future salary increases in the government).

The Actuarial Interest Factors, and therefore Actuarial Interest values, can increase or decrease as a result of any change in the demographic and/or economic assumptions which could result in the change in your benefit payable at the time of exit.

When was the actuarial factors last update?

The Actuarial Interest Factors were last changed on 1 April 2015.

Why is there a need to change actuarial interest factors every 2 years?

The GEPF reviews the Actuarial Interest Factors as part of the Actuarial Valuation to make sure that they remain appropriate for the membership of the GEPF in changing conditions.

Regularly changing the Actuarial Interest Factors is important to ensure that members who leave the Fund receive an appropriate benefit based on the benefits they have built up in the Fund and to ensure that the Fund does not make a profit or a loss based on the actual benefits that are paid to the exiting members.

FAQS for Board Members at Roadshows

  1. What or who is the GEPF?

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 primaryrole of the GEPF is to protect the wealth of its members and pensioners, by safeguarding their retirement benefits through proper administration and prudent investment.

  1. How successful has the GEPF been?

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 108.3%, implying that the GEPF’s assets, most of which are managed by the PIC, significantly exceed its obligations. In other words, the GEPF has R1.08 for every R1 it owes its retiring members.

  1. Who governs how we function and operate?

The GEPF is governed by a Board of Trustees who are accountable for its administrative and investment performance. According to the Government Employees Pension (GEP) Law, fiduciary responsibility for the Fund rests with the Board of Trustees. The law requires that the Board be appointed for a four year term.

In line with the GEP Law, the Board consists of 16 trustees, led by an elected Chairperson and Deputy Chairperson. The Board is constituted as follows:

  • 6 employee representatives, nominated by the Public Service Co-ordinating Bargaining Council (PSCBC),
  • 1 elected pensioner representative
  • 1 elected security forces representative of South Africa
  • 8 employer representatives (nominated by the Minister of Finance), this including a minimum of 1 independent specialist.

The Board has constituted 5 permanent committees and two subcommittees to give effect to its mandate and strategic direction. These are:

  • Benefits and Administration Committee
  • Finance and Audit Committee
  • Governance and Legal Committee
  • Investment Committee
  • Remunerations Committee
  • Valuations subcommittee
  • Social and Ethics subcommittee

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

  1. How does GEPF ensure responsible investing?

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.

  1. How do we grow the funds that we are entrusted with?

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 classStrategic asset allocation (%)Asset allocation range (%)
South African assets  
Cash and money markets40 – 8
Domestic bonds3126 – 36
Domestic property53 – 7
Domestic Equity5045 – 55
Rest of Africa (excluding South Africa)  
Africa equity2.50 – 3
Africa bonds1.50 – 2
Africa property10 – 2
Global assets
Global bonds20 – 4
Global equity31 – 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’sAnnual 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.

  1. How does the GEPF monitor and track the investments and the Public Investment Co-operation (PIC)?

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.

  1. How do we deal with investment proposals?

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.

  1. Where does the Government Pensions Administration Agency (GPAA) fit in?

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.

  1. What benefits does GEPF offer to members?

The GEPF provides:

  • Benefits for normal, early, late retirement and ill health retirement
  • Benefits for members affected by retrenchment/ restructuring
  • Funeral benefits
  1. How does GEPF ensure members’ and pensioners’ best interests?
  • The GEPF Board of Trustees keeps a close eye on how Asset Managers such as the Public Investment Corporationand 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.
  1. What does ‘developmental mandate’ mean and how much does GEPF allocate towards developmental investment?

‘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.

  1. Who manages GEPF investments?

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.

  1. What type of fund is GEPF?

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.

  1. When was GEPF established, by whom and for what purpose?

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.

  1. How many members does GEPF have at present?

1 273 125   active members as at 31 March 2018

  1. How many GEPF pensioners draw monthly?

 450 322 pensioners and beneficiaries as at 31 March 2018

  1. What is a Child’s Pension?

When a GEPF member dies, the GEPF paysa 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.

  1. Why and what are our Investments in Africa?

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.

  1. Does the GEPF oppose the disclosure of investments?

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.

  1. Alleged of mismanagement by certain stakeholders. What are our views?

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.

  1. What steps have been taken to address problems at the PIC?

The President Ramaphosa has appointed a commission of enquiry to investigate the allegations made against the PIC and its management. The GEPF will cooperate fully with the Commission if required to do so.

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.

  1. Is the GEPF concerned about the issues at the PIC?

The Government Employees Pension Fund supports the establishment of this inquiry as we believe it will result in a stronger and more effective PIC. In this regard, the GEPF has written to the PIC Inquiry indicating its willingness to cooperate fully with the inquiry.

We have also noted with concern the recent suspensions of senior PIC employees as well as the instituting of a forensic investigation by the Board of the PIC into allegations of impropriety against certain directors of the Board. The GEPF views such matters in a very serious light and as such, we have written to the PIC raising our concerns with respect to these matters, including the alleged governance failures at the PIC

It is understandable that the revelations at the inquiry and the alleged governance failures are as much a concern to you, our members and pensioners, as it is to us at the GEPF. In this regard we have further strengthened our oversight and monitoring including setting new limits for approvals that the PIC require for investments.

  1. Are you aware of the correspondence between the UDM and Minister with respect to the PIC?

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.

  1. Understanding our investment in VBS

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.

  1. Is it true that the GEPF is considering converting ESKOM’s bonds to Equity?

 With regard to Eskom the GEPF has not taken any decision to convert its bond exposure into equity. `

  1. Fighting Crime?

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.
  1. Why does a member incur a debt with interest in a case of a divorce?

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.

  1. When is the divorce rule going to be amended?

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.

  1. Why is GEPF not loaning money to members?

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.

  1. Why is former homelands employees’ service of employment not accurate?

The GEPF relies on the information it received from the respective previous pension funds which were amalgamated into the GEPF. If that information appears to be incorrect, the GEPF requires supporting evidence from the relevant employer to confirm any possible changes to service records.

  1. When is the historical exclusions (PDP’s) going to be addressed?

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.

  1. Why is it that the GEP law allows for early retirement / resignations but imposes penalties when such is invoked?

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.

  1. Why is the medical subsidy received by some pensioners and not all pensioners?

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

It is important to note that all the investment done by the GEPF are done in the best interest of the GEPF members, the country and the economy. For instance, if the GEPF did not loan Eskom the R5 billion in February 2018 to service its debt, it would have resulted incross defaults with terrible consequences for the economy, including you and I. We all must play a role in building our country and economy. Be assured the GEPF’s sole purpose and mandate is to look after its member’s interests – Your Interests!

  1. Is our pension safe with the GEPF

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.

  1. Is the GEPF about to go bankrupt?

In 1996 the GEPF had 72% minimum funding level and has grown to 108,3% funding level.. This means that the GEPF has got R1,08 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.

  1. 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?

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

  1. Why are we being taxed while working (salaries) and even when we withdraw our pension benefits?

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.

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

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.

  1. How are the annual increments determined on monthly pension?

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.

  1. What is the GEPF stance on the proposed severance packages in the public service and will the GEPF ease the penalties provided by the GEP Law in relation to early retirement?

Since this announcement by the Minister of Finance, the GEPF has not been approached on the details of the suggested severance packages for public servants. We are awaiting for the Minister of Public Service and Administration to provide details on how the severance packages are going to unfold. As a result, for now the GEP Law applies wherein it provides that a voluntary early retirement (retiring at 55 or above but before 60 years) the 0.33 % penalties for every year until 60 years is applicable until otherwise advised by the Minister of Public Service and Administration

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