Everything is A-ok at SA government's largest pension fund, says head

The head of South Africa's largest state pension fund, Abel Sithole, has said the fund remains financially sound and employers would not need to increase contributions, despite concerns raised by Alexander Forbes Financial Services in a valuation.

The Government Employees Pension Fund is Africa’s largest, with over 1.2 million active members and more than 400 000 pensioners and beneficiaries.

An Alexander Forbes actuarial valuation reported that, as of March 2018, the fund was facing a contribution shortfall of R5.6bn per year, or about 0.34% of the its liabilities. The GEPF's investment portfolio currently stands at about R1.8trn.

The fund also has considerable exposure to the contentious investments by state-run asset manager the Public Investment Corporation, including in IT group AYO Technology Solutions and Steinhoff International Holdings. The PIC invests on behalf of the pension fund. The corporation is the currently the subject of a judicial commission of inquiry. 

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Sithole told reporters in Cape Town on Thursday morning that there was no cause for alarm. The Alexander Forbes report, he said, had been subjected to varying interpretations. "The fund is doing very well and is financially sound. The accountants and the actuaries say so," he said. 

He said there was no reason to fear that the fund's allocations ran the risk of being wiped out, adding that the GEPF was in a position to continue paying out benefits at rates comparable to past years. 

"The GEPF has actually given higher returns than expected. In terms of practice we have been able to grant [increases at] CPI (consumer price index) in some cases and even above CPI in previous years. You can never perfectly match everything like pay increases, death and retirement," Sithole said.

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He said the fund would not need to approach government for assistance, as it was well funded and employers would not need to increase contributions.

"It is important to establish the overall funding level. It is not perfect right now, but it is okay. The reason why the shortfall is not a big issue is because we remain well-funded. There a shortfall but in the current course of balance, it is not something we are too worried about," he said.