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FINANCE PORTFOLIO COMMITTEE
10 November 2006
SPECIAL PENSIONS AMENDMENT ACT: NATIONAL TREASURY UPDATE ON IMPLEMENTATION
Chairperson: Mr N Nene (ANC)
Documents handed out:
Special Pensions Amendment Act Implementation Powerpoint presentation
Special Pensions Amendment Act, No. 69-1996
Special Pensions Amendment Act, No. 27-2005
Special Pensions Amendment Act, No. 21-2003
The Special Pensions Administration division of National Treasury gave a report on the implementation of the Special Pensions Amendment Act. The Special Pensions Administration had focused on setting up infrastructure, an awareness campaign, forming partnerships at regional level, training, and a pro-active Research Project. The key changes to the Act had been the inclusion of benefits to spouses, orphans and reconsideration of claims rejected by the Board or Review Board. An error in the Act had been found, that incorrectly extended the benefits of the older category also to the middle category. The Act had excluded those who were under 35 as at December 1996, and although the Committee had taken a resolution last year asking the Executive to find a way to address this issue, nothing had been done. This was still a cause for concern.
The Special Pensions Administration had, in partnership with other bodies, tried to draw a list of those who were entitled to benefits but who had not yet claimed, and this had identified about 15 000 potential claimants. It seemed that not all would be reached by the cut off date of 31 December 2006. Statistics were presented of the numbers of applications approved, and it was noted that around R2 billion had been paid out in benefits since the Act came into operation. The key challenges included obtaining outstanding applications, dealing with applications submitted without the correct documentation, capacity to screen and process applications, fraud, the backlog of cases awaiting review and the high number of contract staff whose contracts were due to expire shortly. The key programmes for the following year included finalising applications, client support, addressing the backlog, preparing for the dissolution of the Review Board and correcting the errors in the Act.
Members raised questions on the backlogs, the capacity, whether the firms to whom work had been outsourced were equipped to deal adequately with the work, the ratio of claims under the amended Act to claims under the old provisions, the effect of the error in the Act and the steps needed to correct it, the nature of the fraudulent claims, the call centre and the assistance given to members of the public. Several members asked questions in relation to the under 35 age group and their right to special pensions or military pensions. The Special Pensions Administration stressed that the Committee would need to assist in taking the matter further, as the Administration could only implement what it was told to do, and could not be proactive. This was a political issue, and about 7000 applicants’ claims had been rejected solely on the grounds of age.
Mr Donny Jurgens, Chief Executive Officer, Special Pensions Administration, National Treasury, gave an update on the administration of the Special Pensions Amendment Act. Key focus areas involved setting up the infrastructure, holding an awareness campaign, forming partnerships at regional level, training, and a pro-active Research Project. He detailed the specific areas of implementation and mentioned that all processes had been completed and benefits were being paid. The key changes to the Act were the inclusion of benefits to spouses, orphans and reconsideration of claims rejected by the Board or Review Board. He stated that there was unfortunately an error in the Act, which had arisen through benefits for the 55-60 year olds being wrongly assigned to the 50-65 year old category. The Deputy Minister had been consulted and had asked National Treasury to explore opportunities to reduce the gap in benefits between the two groups. This matter should be resolved within the next two months.
Mr Jurgens described the focus of the national awareness campaign, which had emphasised the closing date of 31 December 2006. National Treasury had held a number of roadshows, and had distributed information, and regional staff had also held mini road shows. Regional partnerships had been established with political organisations, who helped to get the message out to their constituents. He tabled an example of the kind of slide show that was given at the workshops.
Mr Jurgens stated that the issue of the under-35 year old exclusion was a dominant theme at the roadshows. Young people were concerned why their applications had not been approved and many questions were raised on the procedure. Partnerships had worked on verification and reach-out at the political level. The purpose of the partnerships was to foster a better understanding between stakeholders and the special pensions administration (SPA). Partners were trained and assisted to make the forms available.
The proactive research programme was launched to proactively identify people who potentially would qualify for benefits under the legislation but who had not yet applied. A number of databases were used to try to identify, for example, those who were treason trialists, those who died in detention, political prisoners, those who died in exile, and some counter-intelligence files had been accessed to give information on missing persons. A list of 37 800 names was compiled, of whom about 50% had not made application. Even taking into account potential overlaps on the lists, this still left a figure of around 7 000 who had not applied. It seemed that not all qualifying applicants would be reached by the closing date.
A statistical overview of the applications was tabled, indicating that about 47% of the 38 900 applications had been approved and of the 6 909 reviews 13% had been approved and 39% were still pending. 163 applications had been received from spouses, 1 from an orphan, 130 funeral applications and 29 applications for review since the Amendment Act came into effect. Around R2 billion had been paid out in benefits since the Act came into operation, which amounted to annual payments of around R180 million, and administration costs per annum of around R6.3 million.
The major challenge was to obtain applications before the closing date and a radio appeal was being launched. Other challenges related to the number of applications were still submitted without supporting documents, or with documents that did not meet the criteria. The Special Pensions Administration (SPA) needed more capacity to screen and process applications. It would redesign the process and hopefully be able to increase capacity once the Board had been dissolved, as it was limited to a certain number of people. Fraud was another challenge, since several false claims had been lodged, and SPA had engaged with the special investigation unit to clean up the database. The backlog of cases awaiting review was a further challenge and although some additional people had been appointed, there needed to be more. The SPA was working on a project to outsource some of the reports to outside firms of attorneys although the Review Board would still approve and sign off all the reports. The workload was high. Around 90% of staff were contract staff and that affected morale. A rash of resignations was expected at the end of the year, as a number of contracts were due to expire.
The key programmes for the following year revolved around the processing of applications, the client support, addressing the backlog, preparing for the dissolution of the Review Board and correcting the errors in the Act. The question of the benefits to be considered for under-35s was serious and the SPA appealed to the Committee to assist in having the Resolution taken last year implemented. When the Act was passed it had excluded from benefits those who were under 35 on 1 December 1996. A resolution was passed in November 2005 that some other measures should be developed to address the plight of this group and the Executive was asked to report back. National Treasury could not take the matter any further as it lay in the hands of the Executive.
Finally Mr Jurgens drew the Members’ attention to the supporting documentation to the slides, which included a typical presentation and a typical information pack given to people attending roadshows.
Mr Y Bhamjee (ANC) thanked the presenters and noted that the newsletter had received quite wide circulation. He agreed that the Committee needed to apply its minds to the problem of the under 35 group. He understood that there were challenges in capacity but asked what the main problem was and what the Committee could do to assist. He warned that insufficient staff would no doubt create blockages that should be avoided.
Mr Jurgens replied that SPA had asked the Special Investigation Unit to assist already in cleaning up the database as it had neither the expertise nor the capacity internally to do this. Other capacity constraints were being addressed at the moment. The research project was intended to assess the likely number of applicants and the capacity that SPA would require would be assessed at the end of December. Draft project plans had already been given to the Board.
The Chairperson asked what would be done about the people who had not applied by 31 December. He believed the Committee needed to come up with a tight resolution. The previous resolution, calling upon the Executive to “find a way” was too vague, and was also directed to the Executive in general, and not to a specific person or body. He thought that perhaps a resolution needed to be directed to the leader of government.
Mr K Moloto (ANC) asked for some further clarity on the Section 7 reviews.
Mr Jurgens indicated that the reviews were dealt with under Section 7(2), which he read out. Prior to the amendment, if an application was refused, the person would need to approach the Review Board, and finally the Court. However, many of the applications were rejected on the basis that insufficient or incorrect information was given. It was now possible for a person to approach the section 7 Review Board if further information had come to light, such as the commander having been found, or new affidavits obtained. There had been 39 applications, of which 11 had been approved and 21 were still outstanding. There had been a positive response to the amendment.
Mr M Johnson (ANC) reiterated appreciation for the presentation, and said that he believed SPA had gone beyond expectations in tackling the challenges, which were more political than administrative. He noted that the closing date for applications was 31 December and asked whether SPA believed it was going to be able to finalise all applications by then.
Mr Johnson asked whether there would not be merit in a decentralisation process, especially in regard to verification of claims.
Mr Jurgens said that this was already happening. SPA was in partnership with other organisations who had not only assisted in identifying potential beneficiaries, but would also assist in checking the claims.
Mr Johnson asked what percentage ratio had been identified between the new claims under the amended law and the claims under the law as it had stood in 1996.
Mr Jurgens replied that this year there had been 2 600 new applications, compared with 38 000 applications prior to the Amendment coming into effect.
Mr B Mnguni (ANC) noted that there was a backlog at the Review Board, which led to the decision to outsource some of the matters. He wondered whether the outsourced people would be sufficiently sensitive to the needs of people, as they would essentially be considering matters from paper applications. He wondered if the outsourcing had been a wise decision.
Mr Jurgens replied that the Review Board had briefed a group of firms with political experience, who had been identified by Treasury, had explained what was expected, and had furnished them with draft files and then evaluated the decisions handed back. Some firms had been eliminated by this process and SPA was satisfied that those remaining were capable of making good evaluations. None of the firms would have long-term contracts and further instructions would be given on performance.
The Chairperson asked what the effect of the error in the Act had been, and whether there was much point in trying to have it rectified now that the application time had almost expired.
Mr Jurgens replied that the error had been found only in the Amendment Act, and had not existed from the time of implementation of the principal Act. The benefit for the “super-category” had been inserted by mistake into the middle category. When the error was noticed, the Deputy Minister expressed concern that there was in any event such a large disparity between the middle and super categories, especially since there would be a great difference in the awards given to one colleague who might be 64 and another, who had exactly the same service records, who was 65. She had asked SPA to work with actuaries to try to work out more reasonable benefits, and that was where the matter was at the moment.
The Chairperson asked if this would involve an amendment to the Act.
Mr Jurgens did not know. The Minister had not yet pronounced on whether this was regarded as a technical error or a substantive one. If substantive, then it would involve an amendment, but legal services at National Treasury were also looking at this point.
Mr Bhamjee commented that in a previous similar case there had been the necessity to amend the Act and he believed this would be the route to follow.
Mr N Mbili (ANC) asked for further clarity on the nature of the fraudulent claims. He wondered if the fraud was in any way linked to the lack of capacity in the SPA.
Mr Jurgens stated that one key perpetrator had been arrested on 121 counts of fraud. He would try to find elderly people (who would qualify for a larger amount) and would furnish them with claims, supported by false affidavits and a false biography. The Board was unable to interview every single applicant and had to rely on the paperwork to a large extent. Some fraudulent applications had been approved.
Mr N Mbili also raised the question of the figures and asked if the SPA was satisfied that the outstanding claims were a fair reflection. He asked what sources had been used, and if they were reliable.
Mr Jurgens replied that the Head of Research at the SPA had made an attempt to narrow down the list to people who were likely to qualify under the Act. The Truth and Reconciliation Commission had listed people who would not automatically qualify for a special pension. SPA conceded that the process had not been completely exhaustive because there had been constraints in both time and capacity. However, they had worked with a number of different parties to try to cover as broad a base as possible. It was possible that the calculations were not totally correct, but the research had been an attempt to find people whose surviving families had not heard of their possible entitlement under the Act. The process was ongoing and any assistance from Members would be appreciated.
Mr Jurgens then added that there was a mechanism in place to assist those who did not know that they could apply. It was possible to try to process some forms using the information that was available from the various sources, so that at least the applications could be regarded as pending. However, it must also be remembered that the potential beneficiaries had had a period of ten years to apply. He was not sure what could be done to assist further.
The Chairperson said that the Board and National Treasury would need to compile a report and this would be considered further by the Committee.
Several members asked questions in relation to the under 35 age group and the questions were answered all together by Mr Jurgens.
Mr Moloto felt that the under 35 problem needed to be taken up with the Minister. He noted that the Executive was supposed to report back in six months. He asked who was responsible for implementation of the decision. He further asked whether the demobilised members of the non statutory forces (NSF) had been correctly identified as he thought that the figures quoted were too low.
Mr Johnson also asked what would be the likely cost if pensions were to be awarded to those under 35 and what number of applicants had been identified.
Mr S Dithebe (ANC) asked what the Resolution taken by the Committee was to entail. If special measures were to be invoked to cater for the under-35s he asked whether this would require another amendment to the Act. The trend of concern for this group had been confirmed by the public hearings.
Mr Dithebe also noted that there were a number of people who had died at a very young age under tragic circumstances, and their relatives had had some time to bring matters to the Truth and Reconciliation Commission and had been able to receive some compensation. He asked whether they could still apply.
Mr Jurgens said that there was a provision in the Act that a person who would have been 35 years old on 1 December 1996 could qualify, regardless of the age he was when he died. The Board would make a judgment call as to experience in the struggle and would be able to assess whether that person would have gone on, had he lived, to make further contributions. An innocent bystander who happened to be caught in crossfire, for example, would not be in the same position as one who had already been involved in political activity. He suggested that Members should advise constituents who may be in doubt to put in an application.
Mr I Makopo, Chairperson of the Board of SPA, added that the Board would consider every case in terms of the Act. He added that if the person had died before 1990, and was under 35 at that time, there was a further category who could qualify.
The Chairperson indicated that a copy of the Act was available and Part I of the Act listed the right to pensions. He suggested to Mr Dithebe that it was not appropriate to discuss specific cases now, but that he should speak to Board Members.
Mr B Mnguni noted that it seemed to be up to the Executive, and not to this Committee, to take the Resolution in regard to the under 35s further.
Mr Jurgens said that the under-35 exclusion was a difficult issue. It was primarily a political matter. One of the areas of uncertainty was who was “the Executive” and who was to take the matter further. Officials of the SPA could not do so.
In regard to quantification he said that this too was not up to him, as it depended upon a policy decision. Various options had been discussed, including a form of pension, job creation, skills development, but nothing had yet been resolved and it was impossible to quantify the potential category until the policy had been concretised. SPA would have to wait for instructions and would implement whatever it was told to.
The Chairperson asked if it was possible to give a figure of those who had been disqualified purely on the grounds of age. He asked that that figure be sent through in writing, if possible, as it would be useful information to be included in a Report by the Committee.
Mr I Davidson (DA) was not sure that a figure in isolation would serve any real purpose. He did not feel that a pension would be appropriate, and felt rather that since this category had forsaken opportunities in order to join the struggle, opportunities should now be offered. This was not a numbers issue. It was rather an issue of skills and development and education. He felt that the Committee needed to be more lateral in its thinking and frame a resolution in far more precise terms, so that the people affected could be given the opportunity to make a real contribution to society.
The Chairperson said that it was in this spirit that the Committee had previously made the resolution last year. It had asked the Executive to look for ways to address the plight of the under 35s. He still believed that an indication of numbers would assist but asked whether it was possible also to give a profile of the people who had applied.
After a short break Mr Jurgens said that about 7 000 applications had been rejected on age grounds. He would compile a report and send it through as soon as possible. He suggested that whatever decision the Committee made, it should meet with stakeholder groups representing the under-35s and involve them in the process.
Mr Johnson asked if the NSF members were entitled to a military veteran’s pension. He had recently heard that some members were given the option of whether they wished to accept a military veteran’s pension or the special pension, but were not given proper advice as to the consequences of each.
Mr Jurgens said that the military pensions did not fall under the Special Pensions. There were still areas of confusion. The NSF pensions converted time served to pension service if the person took up a government position. The special pensions, often considered in conjunction with the Government Employees Pensions Fund (GEPF) gave a specific payment, typically intended to compensate the person for the fact that he, by joining the forces, had deprived himself at that time of opportunities to complete his education or undertake career moves. A person would have to make a choice which option to elect and could not be paid twice for the same period. If a person opted to take the NSF benefits, the special pension would cease.
Ms N Allie-Edries, Deputy Director General, Corporate Services, National Treasury, added that the Department of Defence handled the NSF pensions. When a person applied for a pension, and there was a possibility that he qualified for both, the Department of Defence would request the GEPF to do a calculation of the benefits payable under each and would present those findings to the applicant.
Mr S Thokoane, Member of the Board, SPA, added that this illustrated the need to educate the public more about the pensions.
Ms S Ncame, Member of the Board, SPA, said that although in theory the SPA was not responsible for the NSF pensions, as a matter of practicality it did become involved as on the death of a person receiving the NSP the family would often then approach the SPA. SPA had more experience in making assessments than many in the Department of Defence.
The Chairperson commented that this seemed to be a matter that needed to be discussed between the Departments and he commented that it would be useful for the Committee to raise the point in the Report and recommendations from the Committee.
Mr Johnson commented that many people applying to the SPA had felt demoralised by the treatment they were given. Many were desperate and the application for a pension was their last resort. Some of the staff seemed to be young people who were not fully aware of the background to the Act, and did not appear to be sympathetic and offer all the options. A good public relations approach was essential.
Mr Jurgens stated that before the toll free number call centre was established it was possible that a person phoning through might not have spoken to a person with experience. However, trained staff were manning the GEPF and the SPA call centre and the calls could be monitored to check if there were problems. He confirmed that if the staff were not professional in their attitude then steps would be taken against them.
Mr Bhamjee commented favourably on the fact that so many members of the Review Board had taken the time to attend the meeting and share their experiences with the Committee.
The Chairperson also expressed thanks for the immense effort that the SPA was making to try to assist all and for the excellent report.
The meeting was adjourned.