ATC101102: Report on Funding Solution for Transnet Second Defined Benefit Fund (TSDBF) & the Transport Pension Fund (TPF)

Public Enterprises

Report of the Portfolio Committee on Public Enterprises on the Funding Solution for the Transnet Second Defined Benefit Fund and the Transport Pension Fund, dated 2 November 2010

 

1. Introduction

 

The Portfolio Committee on Public Enterprises received a petition from the Pensioners of Transnet Second Defined Benefit Fund (TSDBF) and the Transport Pension Fund (TPF). The plea of the pensioners was informed by the deteriorating economic conditions and challenges that they faced as a result of the low pensions they continued to receive. They received an annual increase of 2% on their pensions for 2 decades as per rule Rule 24 (Rule as a Schedule) of the Transnet Pension Fund Act (Act 62 of 1990) as amended in 1991 (52 of 1991); amended in 2000 (41 of 2000) and amended in 2007 (6 of 2007).

 

2. Background

 

Prior to 1990 Transnet had the Railways and harbours pension Fund for Black employees and the Railways and Harbours Superannuation Fund for white employees. In 1990 these two funds were merged into the Transnet Pension Fund which was established under the Transnet Pension Fund Act of 1990 (Act 62 of 1990). Prior to the merger the two pension funds were controlled by the state and had an actuarial deficit of R17.1 billion. The fund has 79 467 members and the average pension received by the members is R2 833 per month, and 40% of the pensionersreceived less that the State’s social pension of R940,00 per month (as in 2008).

 

3. Investigation by the Committee

 

Having considered the petition of the Pensioners, the Committee invited the affected stakeholders to brief the Committee and subsequently took a resolution to investigate a funding solution for the Transnet Second Defined Benefit Fund and the Transport Pension Fund.  The Committee established a task team that comprised of Hon G Borman (ANC) (Convener), Hon L Gololo (ANC), Hon G Koornhof (ANC), Hon S Van Dyk (DA), representatives of Transnet, Department of Public Enterprises and National Treasury.

   

The task team met several times with Transnet, National Treasury and the Department of Public Enterprises and consulted with parties, study groups and clusters.  Bearing in mind the injustices of the past a funding solution needed to be affordable, fair and one that did not jeopardise the future of the pension funds. The funding solution was aimed at addressing the following objectives:

a)         Ex gratia payment to compensate pensioners for the low amounts paid out in the past;

b)         Increasing the base pension of the pensioners; and

c)         An increase policy to be applied going forward.

 

4. Recommendations

 

The task team of the Committee tabled a report with recommendations to the Portfolio Committee on 2 November 2010. The Committee deliberated on the report and adopted the following recommendations:

 

Transnet and National Treasury should make a cash injection of R1.963 billion into the Funds which will be a funding solution for TSDBF and TPF:

a)       An ex gratia payment of 5 months’ pension;

b)       A base upliftment of 3.21% and

c)       A 75% of CPI annual increase going forward on the 3.21% uplifted base

 

5.       Conclusion

 

Both Transnet and National Treasury participated in the process that led to the recommendations, and the figures above were derived from presentations on both TSDBF and TPF combined. They agreed that the funding solution was affordable.

 

 

Report to be considered