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 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.
2. How successful has the GEPF been?
Since its establishment in 1996, the Government Employees Pension Fund (GEPF) has grown from R 127 billion to R 1.8 trillion currently, becoming Africa’s largest pension fund. 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 current solvency measure of 108%, 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. Such a valuation is currently done every two years, despite the requirement being every 3 years.
3. 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.
4. 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.
5. 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 bonds||2||0 – 4|
|Global equity||3||1 – 5|
It is important to note that 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.
6. 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 asset manager like any other pension fund and its investment manager. Specific legislation (GEP Law) 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 actually exist 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.
7. 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.
8. 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.
9. 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
- Child’s pension
- Spouse pension
10. How does GEPF ensure members’ and pensioners’ best interests?
- The GEPF Board of Trustees keeps a close eye on how the Public Investment Corporation 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
11. 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. In 2018/19, this mounted to just over R2 billion rands.
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.
12. 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 reports of the GEPF.
13. 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.
14. 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.
15. How many members does GEPF have at present?
1 265 421 active members as at 31 March 2019
16. How many GEPF pensioners draw monthly?
464 138 pensioners and beneficiaries as at 31 March 2019
17. How many children receive child pension at present? And what is child pension?
1 601 child pension beneficiaries as at 31st March 2019.
When a GEPF member dies, the GEPF pay his/her 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.
18. 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. To date, the fund has drawn 25% of the committed capital and made four infrastructure investments.
The GEPF follows specific approval and governance processes to approve such investments and requests for draw-downs on the committed funds.
19. 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.
20. There has been increased activism by stakeholders about the GEPF investments and management process. What are your comments?
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 AMAGP continuously criticize those trustees that have been duly elected and appointed.
21. What steps have been taken to address problems at the PIC?
The Mpati Commission of Inquiry has released its report, which the GEPF has noted and is currently implementing recommendations relevant to the GEPF. The PIC is similarly implement recommendations relevant to it.
The GEPF is committed to ensuring the PIC is an institution of the highest integrity and governance standards.
22. 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 this bond exposure into equity. `
23. 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.
24. 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.
25. 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.
26. 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.
27. Why is the medical subsidy received by some pensioners and not all pensioners?
It is important to note that this is not a GEPF benefit but a Government one. 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.
28. 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. We all must play a role in building our country and economy. The GEPF’s sole purpose and mandate is to look after its member’s interests – Your Interests!
29. 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.
40. What happens if the member retires but dies within 5 years of retirement?
When a member dies within 5 years of retirement, the following benefits accrues;
- A once-off lump sum (balance of the 5 years annuity) that will be paid to the member’s beneficiaries, as per the nomination form or paid to the deceased member’s estate, if a deceased member did not have beneficiaries, and
- A monthly pension that is paid to the deceased member’s spouse (spousal annuity)
39. How is the spousal annuity calculated?
If you die in service, the spouse’s annuity is half of the annuity that you would have received had you retired on the date of your death
The calculation is as follows;
50% X [(1/55 X final salary X pensionable service period) + R360]
38. Documents to be submitted to claim spousal annuity
A certified copy of the deceased’s ID (certified within the last six months)
- A Banking details form (Z894)
- A certified copy of the death certificate
- A certified copy of your ID your ID and confirmation of death by the Department of Home Affairs
- A certified copy of marriage certificate OR your customary union certificate / lobola letter / civil union certificate OR a certificate confirming your Hindu or Muslim marriage OR marriage in terms of any religion
37. What happens if the main member is not married or have a life partner?
If the main member is not married at the time of death, no spouse’s pension is payable.
36. How is spouse pension determined?
If the member dies in service, the spouse will receive 50% of what the main member would have received had the member retired on their date of death. The 50% is a default choice if the member did not make a choice of either 50% or 75% which are the options available to members.
Your decision regarding the 50% or 75% is final therefore consider it carefully, you cannot change it. Take all factors in consideration, consult a financial adviser because if you for example took the option of reduced monthly pension to enable the spouse to receive 75% of your monthly pension and the spouse dies before you, then you will have to cope with the reduced monthly pension as selected by you because it will not increase just because your spouse died before you.
The Spouses pension is a LIFELONG PENSION and does not stop if the spouse remarries. If you die with more than one surviving customary spouse, then the spouse’s pension will be divided equally amongst the surviving spouses.
If the GEPF member dies AFTER retirement, GEPF will pay the spouse a monthly pension worth either 50% or 75% of the pension the GEPF member was receiving at the time of the member’s death. Remember in this scenario, the member retired and thus had the opportunity to complete the choice form whether the spouse must receive 50% or 75% of the member’s monthly pension.
35. What is Spouse Annuity / Life Partner pension?
A monthly pension or annuity is only paid to the spouse or life partner of a member or pensioner who has died. It is not paid to other dependants or beneficiaries who may have been named on the Nomination of Beneficiaries form.
34. What is child’s pension?
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.
33. How is the annual pension increase determined?
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.
32. 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;
- Retirement , Death or Severance Benefits
Depending on the mode of exit the applicable tax tables as prescribed by SARS is applicable.
31. 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
30. Is the GEPF about to go bankrupt?
The GEPF is financially stable. In 1996 the GEPF had 72% minimum funding level and has grown this to 108% funding level in 2019. 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 and about to go bankrupt.