GOVERNMENT EMPLOYEES PENSION FUND (GEPF)

The GEPF is Africa’s largest pension fund. They have more than 1.2 million active members, in excess of 400 000 pensioners and beneficiaries, and assets worth more than R1.6 trillion. They are also the single largest investor in Johannesburg Stock Exchange (JSE)-listed companies.

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The fund is governed by the Government Employees Pension Law (1996) and manages and administers pensions and other benefits for government employees from participating employers.

The primary role of the GEPF is to protect the wealth of its members and pensioners by safeguarding their retirement benefits through proper administration and prudent investment.

GEPF encourages its active members to retire with GEPF instead of resigning. “GEPF offers members valuable benefits. It is well documented that failure to preserve retirement benefits when resigning lead to members not being able to maintain their standard of living in the long run”, says Principal Executive Officer Abel Sithole.

There are also rumour-mongers who target members and formulate rumours that are not true. They target long-serving members who are close to retirement, claiming that cashing out pensions would be better than retiring, without providing facts about tax implications and all the other benefits that members would forfeit by resigning.

Members who resign lose several benefits, including medical benefits. Losing such benefits can have dire consequences and it is important for members to consider this before resigning, as pensioners often find their medical costs rising steeply after retirement.

The benefits of retiring with GEPF are numerous and include access to non-contributory benefits such as the funeral benefit, orphan’s and spouse/lifetime partner pension, which do not come from the member’s pockets.

In addition, the life partner or spouse also receives a percentage (50% or 75%) of the monthly spouse’s pension for life.

It is important to note that the annual pension increases rise broadly in line with inflation to ensure that GEPF pensioners keep their buying power.

GEPF assures its members and pensioners that their pension benefits are safe and that their benefits are paid for in terms of the rules of the fund, and are not directly dependent on contributions by themselves, the employer and the fund’s investments.

In making investment decisions, the fund’s investment manager, PIC, is guided by a mandate provided by GEPF that outlines which type of investments can be made, the percentage allocation for each asset class, benchmarks and performance targets, among other guidelines.

To ensure that the fund keeps to its objective of paying benefits to members and beneficiaries, a number of mechanisms are in place to ensure that the PIC acts within its mandate.

GEPF’s investment policy and strategic asset allocation are reviewed and updated regularly in line with GEPF’s Asset Liability Model. This review is carried out in consultation with the Minister of Finance in terms of Section 6(7) of the GEP Law and Rules. The GEPF’s Developmental Investment policy focusses on targeted investments, which contribute to positive economic, social and environmental outcomes for South Africa while earning good returns for members and pensioners. The DI policy is the foundation of the GEPF’s investments in economic infrastructure, social infrastructure, environmental infrastructure and priority sectors that generate job creation.

In addition, the GEPF has a Responsible Investment (RI) policy. The (RI) policy is an overarching strategy aimed at integrating environmental, social and governance issues into investment decisions and ownership practices. The RI policy underpins all GEPF investments.

Adds Sithole, “As a long-term investor, GEPF understands that its success cannot be isolated from the development of the country. Any constraints on South Africa’s economic growth will have a similar impact on the fund. Therefore, investments in infrastructure help improve the lives and prospects of South African citizens, especially GEPF members and pensioners.”

GEPF is mandated to protect the members’ benefits as highlighted by the investment performance of the fund in the past ten years, which shows good standing. The assets of the fund have grown from R416 billion in 2005 to R1 591 billion in 2015.

It is also important to note that in any investment environment, certain investments will achieve above expectation and others will not reach their targets, but the fund’s overall investment performance over the last few years speaks for itself. Members and pensioners should note that the GEPF assumes the investment risk—the member/pensioner will continue to receive their pension, irrespective of how the underlying investments perform.

It is important to bear in mind that the GEPF is a defined benefit pension fund and therefore has to adhere to strict regulations governing its financial liability to members and pensioners. The pension benefits of GEPF members and pensioners are thus safe in the care of the fund.

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