PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES (THE COMMITTEE):

TASK TEAM ON THE TRANSNET SECOND DEFINED BENEFIT FUND (TSDBF)

Mandate

At the Committee meeting on 17 September 2010, it was agreed that a small task team be formed comprising of Mrs Borman (Chairperson), Mr Gololo, Dr Koornhof and Dr van Dyk to find possible solutions for the Fund together with the DPE, National Treasury, Transnet and legal advisers.  The funding solution was to address:
1.	Ex gratia payment to compensate pensioners for the low amounts paid out in the past;
2.	Increasing the base pension of the pensioners; and
3.	Increase policy to be applied going forward.

Progress

A first meeting of the task team was held on 5 October 2010. 

Present at the first meeting, in addition to the task team, were members representing the Board of Trustees of both the Transnet Second Defined Benefit Fund (TSDBF) and the Transport Pension Fund (TPF). 

The three pillars were discussed and Government was requested to develop proposals on an ex gratia payment. Transnet was requested to develop proposals for uplifting the base of pensioners and allowing for an increase of 75% of CPI on the uplifted base. It was recognised that this would require consultation between Government and Transnet.

In addition, the Portfolio Committee members of the task team highlighted the fact that the funding solution should be “affordable” for Transnet and Government, should treat all pensioners fairly, should be sound from a prudential perspective and ensure that the fund maintains a healthy funding level, whilst addressing the injustice of the past and ensure that the future of the pensioners is not compromised. 

It was agreed that the task team would deal with both the TSDBF and the TPF at the same time.

The task team took cognidance of the Budget timelines noted by National Treasury.

A second meeting of the task team took place on 26 October 2010.

The affordable contribution to both funds that would improve the situation of the pensioners is an injection amount of R1.9 billion. 

Recommendation

The task team having applied its mind would have preferred to recommend a R2.56 billion injection amount which would have allowed for the base pensions to be uplifted by 10% and prospective increases of 75% of CPI to be applied going forward.

After thorough deliberations with Transnet, National Treasury and the Department of Public Enterprises and consultation with parties, study groups and clusters and taking into account the government expenditure priorities and taking into consideration inputs by National Treasury, the Department of Public Enterprises and Transnet to the task team, we therefore propose the realistic and affordable scenario of an injection amount of R1.963 billion. This would allow for a 7.4% base uplift and prospective increases of 75% of CPI, should no ex gratia payment be made. 

However, the task team are of the view that an upfront, ex gratia payment be made to the pensioners to provide them with some immediate relief. Two options are proposed for the Portfolio Committee’s consideration:
1.	An ex gratia payment of 1.75 months pension which allows a 5.93% upliftment to the base pensions. This 5.93% increase is equivalent to the projected inflation rate; or
2.	An ex gratia payment of 5 months’ pension giving a base upliftment of 3.21% based on the current inflation rate.

Way forward
Transnet, the Department of Public Enterprises and National Treasury to mplement the proposal before 31 December 2010, following due process.