The Chairperson: Dr. Rob Davies and PC for Finance Committee Members

Dear Chairperson and Honourable Members

Re: Comments on the Government Employees Pension Law Amendment Bill [B-15, 2004]

With this letter, COSATU wishes to raise a few queries and comments on the Government Employees Pension Law Amendment Bill [B25-2004] ("the Bill").

The Committee, by its own admission, acknowledged that previous legislation (most recently the Public Investment Corporation Bill), drafted by the National Treasury, has been flawed in terms of consultation and process. We again remind the Committee of the recalcitrance of this Department, over which you have oversight.

This time, the process for comment is equally problematic. Comment was limited to 19 days, although the Committee extended this to the 8th September). Furthermore, the telephone number of Mr A. Hermans is incorrectly listed in the Gazette. The commitment of the National Treasury to seriously consider written representation on the Bill, is to be strongly questioned, they have again referred the public to Parliament, and not to the Treasury, as opposed to the approach adopted by other departments in publishing first drafts for comment.

Many of the queries raised in this letter may be unnecessary, had the Memorandum on the Objects of the Bill been more comprehensive and descriptive of the context and rationale for the amendments.

Attempts to establish the details of the agreements reached within the PSCBC are ongoing, and in this regards, we would provide additional comment if necessary within the next day or two.

We agree that the amendments to the 8 sections of the Government Employees Pension Law, Proclamation 21 of 1996 (the Law), are largely to correct errors that occurred at the time of the proclamation of the Law; provide for amendments to the benefit structure; and alignment with PSCBC Resolution 12 of 2002 and Resolution 7 of 2003.

Amendment to Section 21: Would the "amount, plus interest at the rate determined by the Board after consultation with the actuary" be cognisant of the increasingly challenging environment in which our retired civil servants live. In other words, over and above the assured minimum guarantee furnished in terms of the Rules of the GEPF, will there be space to consider other factors that would maximally benefit pensioners benefiting from the GEPF, yet have prudent regard to its future commitments?

Amendment of section 23: Agree that the provision should exclude the benefit from being considered as an asset in an insolvent estate.

Amendment to section 25: the insertion "in terms of its pension increase policy" requires further clarity. Since the Minister of Finance, in terms of the Interim Constitution of the Republic of South Africa acts as the "Interim Board of Trustees of the GEPF until such a time that a Board of Trustees, as agreed, is implemented", the establishment of this policy is interpreted to be at the Minister’s discretion. Furthermore, we need clarity regarding the distinction between a pension increase policy and a general administration/management policy. 

COSATU has, for a long time, been demanding the appointment of organized labour representatives of the public service to serve on this Board of Trustees, and would call for this policy to be implemented once the Board of Trustees are fully constituted and have made inputs and examined the details of the ‘pension increase policy".

The details of this policy are particularly important, given the fact that the GEPF is a defined benefit pension fund, where the benefits are "generally guaranteed and are not dependent on the investment returns of the fund or on the level of employer contributions", and where the employer generally takes the risk of poor investment returns. These increases need to be considered in light of the increased cost of living and level of disposable income of retirees – clearly there is a need for this process to be as consultative as possible – and should include pension member trustees, and public servants who are members of the Fund, including organized labour nominees/ representatives.

Amendment to section 26: (a)(1) Agree to the tighter legal drafting of this subsection’s rewording to ensure payment of a benefit due to a member within 60 days of which the benefit is payable. However, with regards to (c)(4), we would like to clarify whether it is a common practice not to pay interest on funeral benefits and the rationale for this addition.

Amendment to section 27: We require clarity with regards to the declaration of certain former members as dormant members of the Fund as being limited to the provision that ‘his or her membership has been terminated on or before 1 April 2003’ – what is the rationale for excluding members of the public service after April 2003? What other mechanisms, beside section 27, are there for members who leave the public sector before the mandatory retirement age? What are the implications when not declared a dormant member of the Fund? It is important to clarify the discretion in this clause. 

Finally, we note the amendment in section 30A to include a reduction in the benefit payable by the Fund to include those persons receiving benefits in terms of the Demobilisation Act, 1996 (Act no.99 of 1996) (over and above those excluded in terms of the Special Pensions Act, 1996) – we would like clarity as to why this provision has been made at such a late stage (i.e. approximately 8 years later).



Elroy Paulus (Research Co-Ordinator)

COSATU Parliamentary Office


P.O. Box 15

Cape Town