Edition: July / September 2016
CLASS ACTIONS 1
For better or worse
GEPF in firing line over withdrawal benefits.
Members invited to participate in Solidarity litigation.
Trade union Solidarity is preparing to launch a class action against the Government Employees
Pension Fund. Although Solidarity itself speaks
for only 7 100 public servants, a class action implies that
it will seek redress for over 1,2m members of the GEPF.
Two main points appear to be at issue. The first is
whether the GEPF had consulted with the Minister of
Finance and employee organisations, as it’s obliged to
do, before it amended the formula for calculation of
actuarial interest (a member’s accrued benefit paid by
the fund in specific instances such as resignation). The
second is whether, having amended the formula, GEPF
members are better or worse off.
According to Solidarity deputy chief executive Johan
Kruger, the GEPF had reduced two actuarial-interest
factors without the necessary consultation and without
public-service employees even being notified. Although
formal communication structures exist, fund members
only heard about the changes through the media about
five months after their April 1 2015 implementation date.
By way of explanation, GEPF principal executive
officer Abel Sithole wrote to Solidarity: “Generally, the
GEPF endeavours to engage employee organisations
through the legitimate bargaining structure of the public
service that represent the majority of its membership.
The GEPF has focused its attention on engaging the
forum where both the employer (the Department
of Public Service & Administration) and employee
representatives (the Public Sector Coordinating
Bargaining Council) are represented....Due to the
lack of direct ongoing relationship, the GEPF has had some difficulty in complying with its rules around the
consultation process with the PSCBC.”
The change in the factors for computing actuarial
interest impacts on members’ retirement and
resignation benefits as well as death benefits for
dependents and payments to spouses on divorce. The
change has caused members to receive less than their
previous entitlements, says Kruger.
He cites several examples. One is of a police captain
who, on affidavit, shows the detrimental effect.
A calculation performed on 12 May 2015, of the
policeman’s estimated retirement benefit, was as at 31 July 2015 when he intended to resign from SAPS. Then
the calculation of the portion based on his contribution
rate was R1,3m and his actuarial interest was R2,7m.
Another calculation was performed on 28 July 2015,
still with 31 July 2015 being the date of his intended
resignation. This time his actuarial interest, despite an
increase in his salary, was reduced by R173 000.
The calculation of 12 May 2015 was performed after
the effective date of the amendment to the actuarialinterest
factors. In other words, Kruger points out, this
earlier calculation was still performed on the old factors:
“This is a clear indication that the amendment of the
actuarial-interest factors was done retrospectively.”
The change has further knock-on effects, notably in
terms of the Divorce Act. It provides that the “pension
interest” of divorced members be calculated as the
resignation benefit to which the member would have
been entitled on the date of divorce.
The result of the change, Kruger contends, is that the “pension interest” of all members’ spouses – who obtained court orders subsequent to
1 April 2015 in terms of which the member’s
pension interest is deemed to be part of the
estate assets – will also be calculated according
to the revised actuarial-interest factors.
In his long letter to Solidarity, Sithole
wrote: “Although the actuarial-factors did
reduce effective 1 April 2015, it is important
to take into account all the changes to the factors over
time. Calculations prepared by the (GEPF) actuary
show how the actuarial interest of members at sample
ages would have changed depending on the factors used
at each of the pre-2010, 2010, 2012 and 2014 statutory
He then produced an illustrative table of relative
changes for members at the same levels of salary and
pensionable service but at different ages. The only
decrease was for members aged 65 at end-March 2014.
Right or wrong, at least one contentious
issue will continue to stand. The Public
Servants Association has pointed out that the
factors used in the calculation of actuarial
interest must be determined by the GEPF
board on advice of the GEPF actuary after
consultation with the Finance Minister and the
employee organisations. No consultation, as
required by the GEP Law and the GEPF rules,
had taken place.
Might this alone not cause the change to be
In its defence, the GEPF has submitted (amongst
other things) that the change in the actuarial-interest
factors was not an amendment to the benefit but arose
due to an earlier benefit improvement. It had amended
the withdrawal benefit to be a member’s actuarial
interest in the GEPF, rather than a mere return of the