Question NW1037 to the Minister of Employment and Labour
19 June 2020 - NW1037
Cardo, Dr MJ to ask the Minister of Employment and Labour
Whether the Unemployment Insurance Fund has commissioned actuarial research into its financial sustainability of the Fund in the event of mass-scale job losses; if so, (a) who was the service provider and (b) what were the detailed findings?
Reply:
The Unemployment Insurance Fund did not commission Actuarial Research into its financial sustainability in the event of mass-scale job losses.
a) Not applicable since no actuarial Research conducted on sustainability of the Fund in the event of mass-scale job losses.
b) Not applicable since no actuarial Research conducted on sustainability of the Fund in the event of mass-scale job losses.
Our Actuaries have presented the following scenarios:
|
Scenario |
Implications for finances of the UIF |
|
Unemployment rate peaks at 41.4% and COVID19TERS benefits cost R48Billion |
UIF becomes financially unsound as no Insurance Capital left and required to “borrow from future” by using 5% of accumulated credits. Sufficient funds should be available to pay benefits on a PAYG basis. It is possible that the fund could return to financial soundness in 10 years. |
|
Unemployment rate peaks at 41.4% and COVID19TERS benefits cost R68Billion |
UIF becomes financially unsound as no Insurance Capital left and required to “borrow from future” by using 60% of accumulated credits. Sufficient funds available. It is unlikely that the fund could return to financial soundness in 10 years without a contribution increase and will essentially operate on a PAYG basis |
|
Unemployment rate peaks at 53.7% and COVID19TERS benefits cost R48b |
All accumulated credits will be depleted and the UIF would also need to borrow against beneficiaries and service providers to pay claims. Taking liquidity of assets into account, the fund will not be able to pay all claims when due and may need to put RAF-style measures in place to prioritise / structure payments |
|
Unemployment rate peaks at 53.7% and COVID19TERS benefits cost R68b |
Possible remedies for the dire financial position of the fund under this scenario could include: • Additional funding from Treasury • Temporary increase in contribution rate • Reduction in benefit |