The GEPF recently published the report on its latest statutory actuarial valuation, performed
as at 31 March 2024. The Fund continues to be financially sound with a funding level before
contingency reserves of 119%. This means that for each R100 owed to members, the fund
has R119 available to meet the payment. That is an improvement from the previous valuation,
performed as at 31 March 2021, which reflected a funding level of 110.1%. Consequently, the
GEPF is better positioned to meet its funding requirements as at 31 March 2024 compared to
the previous valuation date.
The GEPF’s funding policy requires the trustees to take steps to ensure that the Fund’s funding
level excluding contingency reserves is always above 90%. The results of the statutory
valuation performed as at 31 March 2024 showed that the Fund’s existing assets are sufficient
to cover its liabilities before allowing for contingency reserves and that the Fund met the
requirements set out in the funding policy. The funding level has improved mainly due to:
- actual salary and pension increases being lower than those allowed for in the previous
statutory valuation basis; and - a wider gap between the discount rate and the salary and pension increase
assumptions in the current valuation when compared to the previous valuation.
The GEP Law requires that the financial position of the Fund be investigated and reported
upon by the valuator at least once every three years. The Fund therefore conducts a statutory
valuation. The main purpose of the statutory valuation is to assess whether:
- the existing assets are sufficient to cover the Fund’s benefit obligations;
- the funding level meets the minimum requirements outlined in the rules and policies of
the Fund; - the Fund holds sufficient additional reserves to protect members’ benefits.
This latest valuation of the Fund is based on a membership of 1 264 000 active members and
553 049 pensioners and beneficiaries. The pensionable salaries of members who contributed
to the fund throughout the valuation period increased by an average of 7.6% per annum during
the valuation period. Pensions increased by an average of 5.7% per annum during the same
period. The employer contributed at 16% and 13% of pensionable salaries for Services and
Other members, respectively.
The actuarial valuation basis was updated to reflect the prevailing market conditions as at
31 March 2024. The 2024 economic assumptions are overall weaker than in 2021, with a wider
gap between the discount rate and the salary and pension increase assumptions. The fair
value of the Fund’s net assets as at 31 March 2024 was R2.34 trillion and the accrued liabilities
totalled R1.97 trillion on the best estimate basis. The best estimate basis is a set of
assumptions that do not allow for any margins of conservatism and imply a 50/50 chance of
actual experience being either more or less favourable than expected. The fund reflected a
funding level before allowing for contingency reserves of 119% on the best estimate basis.
In addition to the liabilities held in respect of its existing benefit obligations, the Fund also aims
to hold additional amounts for the following reasons:
- to protect against the consequences of extreme adverse event(s) or scenario(s);
- to allow for potential future improvements in mortality rates; and
- to support pension increases higher than those allowed for in the valuation basis.
Although these reserves are additional obligations and increase the Fund’s liabilities, the
maintenance of relevant contingency reserves reflects best practice in responsible retirement
fund management and are aimed towards ensuring long-term financial sustainability. The
recommended reserves amounted to approximately R903 billion as at 31 March 2024 of which
the Fund can afford to hold approximately R374 billion (or 41% of the total R903 billion),
resulting in a funding level after allowing for contingency reserves of 81.6% (74.3% in the
previous valuation, performed as at 31 March 2021). The Fund’s long-term target, which is an
ideal position is a funding level of 100% after allowing for contingency reserves. As mentioned
above, before allowing for contingency reserves, the Fund’s total member and pensioner
liabilities are 119% funded as at 31 March 2024.
In summary, the Fund continues to be financially sound as at 31 March 2024. The funding
level, calculated on a best estimate valuation basis before allowing for contingency reserves,
is 119% as at 31 March 2024 and the funding level has improved since the previous statutory
actuarial valuation, performed as at 31 March 2021. While the Fund is currently able to afford
only 41% of its recommended contingency reserves (up from 21% in 2021), it is important to
stress that these reserves represent an additional buffer beyond the assets already set aside
to meet members’ benefits. Even with partial contingency reserves in place, the Fund has more
than sufficient resources to honour its guaranteed obligations.
Issued by:
Government Employees Pension Fund
