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MPs to the Rescue of Transnet Pensioners
By
Linda Ensor, All Africa
July 29, 2010
South
Africa
Parliament's public enterprises committee yesterday committed itself to come to the rescue of 75 000 impoverished Transnet pensioners who have been statutorily limited to a 2% annual pension increase since 2000.
Their cause won the sympathy of MPs who decried their low and progressively declining incomes as "very outrageous", "grossly inhumane" and "repugnant to morality". They undertook to have the problem resolved by the end of the year.
About 40% of the pensioners get less than the state old-age pension of R1080 a month, with the average at about R2800 in June 2008 and the lowest pension as little as R219.
Transnet, the Treasury and the Department of Public Enterprises were given three weeks to come up with a solution by committee chairwoman Vytjie Mentor, failing which the committee would amend the Second Defined Benefit Fund Act . Both Transnet and the government have avoided dealing with the matter for years due to the cost involved.
Alexander Forbes senior actuary Anton Nel estimated that to give increases amounting to 50% of inflation on the low basis of existing pensions would cost more than R3bn, which the closed Transnet Second Defined Benefit Fund could afford. Since it has assets of R19,6bn and liabilities of R16,9bn, the rise would balance its funding levels.
However, if the inflation-linked increases were applied to a higher baseline pension which increased by 86% - as the pensioners are demanding - it would cost about R16bn and would require either Transnet or the state to make a contribution. Otherwise the pension fund's funding level would drop to an unsustainable level of about 50%- 60%, Mr Nel said.
The pensioners believe the reason for the low annual increase was that the fund inherited a R17,2bn actuarial deficit when it was changed from being a government pension fund. Pensioner representative John Benwell said the deficit was due to the prescribed investment rules imposed by the former regime when Transnet was established.
Transnet had failed to keep its promise to wipe out the deficit, though the fund did gain R8bn from selling the Victoria & Albert Waterfront and its MTN shares.
"Transnet, as guarantors of the fund, have also not offered to provide funding for any changes," Mr Benwell said. The situation had been worsened by Transnet's minimal contribution of R213 a month towards medical benefits.
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