Transnet Pension Fund Amendment Bill: briefing

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
29 August 2000
TRANSNET PENSION FUND AMENDMENT BILL: BRIEFING

Documents handed out:
Transnet Pension Fund Amendment Bill
Transnet Pension Fund Act 62 of 1990
Transnet Pension Fund Presentation Document

SUMMARY
The committee was briefed on the contents of the Transnet Pension Fund Amendment Bill. The Bill provides that in addition to the present pension fund two additional funds need to be established. The first, to provide for actively contributing employee members to transfer from the present defined benefit fund to a defined contribution fund that would ease the burden on government. The second, providing for the transfer of existing pensioner members from the present fund to a second defined benefit fund, that caters exclusively to them.

It was emphasised that the rules appearing in the Schedule deal only with the Defined Benefit Fund for pensioners. These rules relate to: the membership of the fund, the board of trustees, powers of the board of trustees, how contributions are made and in what instances payouts would or would not be made.

The Bill does not state the difference between 'defined benefit' and 'defined contribution'. The Department stated that they are only dealing at present with the new Defined Benefit Fund for the pensioners. When the Defined Contribution Fund is established, it will be defined.

MINUTES
The acting Director-General of the Department, Mr Andile Nkuhlu, pointed out that the Transnet Pension Fund has had a massive deficit since the early 1990s. Servicing this debt caused major problems that in turn impaired the business activities of Transnet.

Mr Siphiwe Mathobela, the Director of Financial Modelling and Risk Analysis, presented the issues around the Transnet Pension Fund and the proposals that the Department has devised. The objectives of the proposed amendments are:
· To convert active members from the defined benefit fund to the defined contribution pension fund
· To ring-fence pensioners
· To broaden the scope of the guarantee of the employer to include the Transnet Second Defined Pension Fund
· To include the Transnet Second Defined Pension Fund under the scope of recoveries of amounts in respect of the Transmed Medical Scheme
· To deem the guarantee of the employer and the State to be obligations to the Transnet Pension Fund (TPF) and Transnet Second Defined Benefit Fund (TSDBF) in proportions determined by the State Actuary
· To enable Transnet to establish its own Pension Fund, subject to approval by the government

The crux is that from the existence of only one pension fund the proposal is to create three Transnet Pension Funds:
Defined Benefit Fund for pensioners only
Defined Benefit Fund for active members (in existence)
Defined Contribution Pension Fund for active members

Mr Majila, the Director of Legal Services, gave the committee a run down of the rules applicable to the pension fund which is set out in the Schedule of the Bill. He apologetically mentioned that the Department had omitted to include the rules in the Bill initially and that they were now included by way of a schedule. Some of the issues that they deal with are:
the membership of the fund, the board of trustees, powers of the board of trustees, how contributions are made and in what instances payouts would or would not be made.

Ms Gloria Serobe , Transnet's Executive Finance Director, reiterated what the Department had previously stated that the intention is to create three distinct funds, each with its own rules. She also added that the provisions contained in the Transnet Pension Fund Act relating to persons making payments to the existing defined benefit fund cannot be changed. She emphasised the need to clarify to the committee that the rules (in the Schedule) that are being dealt with at present relate to the Defined Benefit Fund for pensioners only

Discussion
The Chair, Mr Belot (ANC), asked how the overall debt of Transnet impacts on the Fund.

Ms Serobe replied that the problem with the existing fund is that there are more pensioners drawing from the fund than there are active members contributing to it. She added that economically speaking this situation is unacceptable. She therefore emphasised the need for the distinction to be made between the various funds.

Mr Msomi (IFP) wanted clarification on the position of non-white employees who in the current Act had been separately provided for. He added that no mention is made of them in the Bill.

Ms Serobe stated that Transnet is aware of these issues and that even though no mention is made of it, they are sensitive to it. Mr Msomi was still not convinced and stated that to accept what Ms Serobe had said would be a leap of faith. Ms Serobe reacted by saying that the issue at hand is a business one and that discrimination is not an issue in the Bill.

Ms Taljaard (DP) asked the Department if they have any idea of the number of active contributors in the present fund that will be switching over to the new defined contribution fund.

Mr Nkuhlu stated that the next few weeks would be critical, as the date for the changeover is the 1 November. He added that at best they could only estimate the numbers changing over.

An ANC committee member stated that the Bill does not state the difference between 'defined benefit' and 'defined contribution'. The Department stated that they are only dealing at present with the new Defined Benefit Fund for the pensioners. When the Defined Contribution Fund is established it will be defined.

The meeting was adjourned for the day.