Transnet signals contempt of its former workers
The question I so repeatedly ask is why retirement fund savings seem to be such an easy target for everyone; and to make it worse, pensioners themselves are also generally seen as soft targets.
And it is not only the unscrupulous who eye the trillions of rands in the retirement sector – too many in the formal financial services industry, employers, trade unions and even government institutions behave badly.
Last week, Transnet and two of its funds toddled off to Parliament with a “solution” for its funds, particularly the notorious Transnet Second Defined Benefit Fund (TSDBF), where pensioners have been limited to increases of two percent a year almost since November 2000, with a few once-off bonuses. This has effectively impoverished them, as the increases were way below the inflation rate.
In 2000, the then Transnet Pension Fund was split into three parts. The existing contributing members were given the choice of staying in an existing defined benefit fund, the Transnet Transport Pension Fund (TTPF), or moving to a new defined contribution fund, while 101 635 pensioners were hived off into the TSDBF. There are now 78 000 surviving members.
At the time the TSDBF was established it supposedly had a surplus of almost R2 billion. However, there were some rather strange investment decisions, which left the fund in a fragile position.
NOT SUBJECT TO THE ACT
Transnet controls the boards of trustees of all three funds. As statutory funds they are not subject to the requirements of the Pension Funds Act, including being subject to the Pension Funds Adjudicator or the requirement that 50 percent of board members be elected by trustees.
The two-percent increase was negotiated by retired senior executives of the TSDBF, but they maintained it was a minimum. Transnet and its appointed board of trustees claimed the two percent was a fixed maximum amount.
The main reason, it seems, was that the fund could not afford to pay any more because of the questionable investment decisions that had been made, and Transnet was not prepared, as the guarantor of last resort, to make up any shortfalls that would occur if pension increases were more aligned to inflation.
As the anger of the pensioners grew and became more vocal and public, Transnet paid a few onceoff bonuses and improved minimum pensions, but these have made no significant difference.
The anger grew to such an extent that the issue was raised in Parliament.
Transnet executives and the chairman of the boards of trustees, Peter Moyo, previously an Old Mutual senior executive and former chief executive of Alexander Forbes, appeared before Parliament’s Portfolio Committee on Public Enterprises.
They told the committee about further efforts they are now making to improve the lot of the pensioners. The fund is now apparently in surplus, but it is no thanks to Transnet, which has not put its hand in its pocket to ensure its former employees are able to meet the withering effects of inflation. The pensioners will, in total, receive:
A once- off bonus equal to five months’ pension. The TSDBF has already paid a bonus equal to two months’ pension, will hopefully pay a further one month shortly, and Moyo hopes the final two months’ bonus will be paid by year-end. While the once-off fivemonth bonus adds almost 42 percent to their pensions this year, it has no effect on future years. The amount is not added to their pensions for next year or the next, so they are excluded from any percentage annual increases.
The TTPF pensioners will receive a five-months’ bonus as well this year. This is the first time they have been granted a bonus.
An increase of between 63 and 68 percent of the inflation rate on their next anniversary date (after the increase has been approved) for both TTPF and TSDBF pensioners. Moyo says the two defined benefit funds want to target increases of 75 percent of inflation in the medium to long term – this is more in line with private sector defined benefit funds.
But even pension increases of 75 percent of inflation are no great shakes. And average inflation for pensioners is much higher than for all citizens, with health costs being a major contributor.
MEDICAL SCHEME ‘UNDER SCRUTINY’
There is still the matter of the Transnet medical aid scheme, where Transnet has been trying to duck out of its responsibilities to pensioners.
Transnet’s acting chief financial officer, Anoj Singh, says that the medical scheme is still under scrutiny.
He does not believe the treatment handed down to the members of the TSDBF is impacting on the morale of current employees.
Well, maybe not, because I presume the vast majority of Transnet staff are on the defined contribution fund, which means they will not be looking to Transnet as the final guarantor of their pensions when they retire.
As with all defined contribution funds, Transnet does not guarantee the pensions of defined contribution fund members – it only guarantees that it will pay contributions for members who are Transnet employees.
Transnet’s treatment of pensioners has been appalling. No credit goes to Transnet for the latest bonuses and proposed pension increases – the money has come from investment surpluses in the two funds, which have been built up by not giving decent increases to fund members in the past and from investment returns. In other words, it is no Christmas present from Transnet.
Transnet should, in fact, dig into its pockets and bring all the pensioners into line with at least 75 percent of inflation for each year that they have been on pension – anything less is to treat former employees with contempt and is an abuse of the aged.