PUBLIC SERVICE COMMISSION

1. PUBLIC SERVICE COMMISSION ASSESSMENT OF THE MANAGEMENT OF SERVICE TERMINATIONS AND PENSION PAY-OUTS IN THE PUBLIC SERVICE 1 MARCH 2017

2. OUTLINE OF PRESENTATION • Legislative Mandate, role and responsibilities of PSC • Problem Statement • Objectives of the study • Methodology • Limitations • Findings • Recommendations • Conclusion • Progress update 2 2

3. MANDATE, ROLE AND RESPONSIBILITIES • The Public Service Commission (PSC) derives its mandate from section 196 of the Constitution and the Public Service Act, which vests it with oversight responsibilities on the organisation, administration and performance of the Public Service. • The PSC is a constitutional body entrusted with the powers and functions to investigate, monitor, evaluate, propose measures, give directives, promote, advise and report on the organisation, administration, personnel practices, values and principles, effective and efficient performance of the Public Service. 3

4. PROBLEMSTATEMENT • Between 2013 and 2015 the PSC received numerous complaints from public service retirees and the beneficiaries of the deceased public service pensioners. • The complaints were about experienced delays in pension pay-outs & other related benefits by employer departments and Government Pension Administration Agency (GPAA). • The PSC also noticed a trend of complaints reported in the media regarding challenges with pension pay-outs, and took a decision to conduct a study in this regard, in addition to providing assistance to some of the complainants. Problem: There has been non-adherence to timeframes for pension pay-outs as set out in the Pension Law. The Government Employees Pension Law, 21 of 1996, as amended, stipulates that the pension pay-out should be transferred to the person concerned within 60 days after the submission of all necessary documentation. 4

5. OBJECTIVES OF THE STUDY • The overall purpose of the study was to determine the extent of non-adherence to timeframes for pension pay-outs as set out in the Pension Law through a holistic assessment of the management of service termination and pension pay-outs in the Public Service, and the following were the specific objectives: • To determine the underlying causes to delays in the processing of service terminations and pension pay-outs; • To identify challenges experienced and/or best practices applied in the management of service termination processes within departments; • To investigate the impact of pension pay-outs delays on the welfare of former employees of their dependents and beneficiaries; and • To investigate the role of all stakeholders, including institutions responsible for the management of pensions. 5

6. METHODOLOGY A qualitative approach to research was adopted for this study. The following outlines the methods and process followed in conducting this study. • 40 of the 44 National Departments were sampled and only 28 departments participated in this study. Focus was mainly on big and strategic departments. 9 Provinces were sampled, only 8 provinces represented by 85 out of 114 departments responded. (Mpumalanga did not participate due to human and financial resources constraints.) • This means 113 national and provincial departments participated in the study. • Secondary data - desktop literature on the subject of service termination and legislative frameworks reviewed. • Primary data - focused interviews were held with the following participants using semi-structured questions: • HR Practitioners responsible for service termination management in departments from the 113 departments; • GPAA Officials responsible for the management of pension pay-outs; and • 91 retirees and beneficiaries/dependents at the GPAA client service centre in Pretoria. 6

7. LIMITATIONS OF THE STUDY • The lack of funds within the office presented itself as a major constraint, as it hindered visits to retirees and/or beneficiaries/dependants who are based in rural areas for engagement to ascertain the impact/challenges they experienced with pension pay-out delays. • Many of the retirees who were assisted by some of the Public Service Commissioners to resolve challenges with their pension pay-out were not willing to discuss their experiences and the negative impact of pension pay-out delays on their families’ livelihood after their cases were resolved. (In terms of research ethics, no one can be forced to participate in a research study.) • There was limited literature available on service termination and pension pay-outs for purposes of comparative analysis. NB: Despite the above-mentioned limitations, the information gathered from the various participants and other sources was sufficient to identify and understand the challenges experienced and to make findings and recommendations on the subject matter.

8. FINDINGS The finding are organised according to thematic areas derived from the objectives of the study. Objective 1: Underlying causes of delays in service termination and pension pay-outs Departmental capacity • Lack of formal training (i.e. structured and planned) on service termination and pension processes for HR practitioners. • There is a heavy reliance on supervisors, experienced fellow employees and GPAA officials to conduct the on-the-job training whilst having their own workloads and also not being trainers by profession which results in such officials giving less attention to the “on-the-job” training that is needed. • The implications of the lack of formal training and the ad hoc “on-the-job” training is illustrated by pension application forms that are submitted to GPAA with errors, resulting in them being returned to the departments for corrections/amendments, which further delays the finalisation of payouts.

9. FINDINGS Departmental management of the beneficiary profiles • Regardless of the departmental efforts to annually remind employees to update their beneficiary profiles, some employees fail to nominate legal or legitimate beneficiaries. • In some instances employees do not declare all their children and if GPAA becomes informed about them, the whole process comes to a standstill until evidence proving their paternity is presented; and that contributes to delays. • In some instances employees would nominate children who are not known to spouses, then their spouses will contest against the payments, thus lead to delays due to the legal challenges.

10. FINDINGS Records Management • Departments are responsible for keeping all the records of an employee, while GPAA is responsible for keeping records related to pension contributions and pay-out which are submitted by departments. • There are instances where the employees’ records with the department would be in contradictory with the years of pension contribution as captured by GPAA. Such would cause some delays as the departments will be busy trying to resolve the problem. Such challenges were experienced with documentation from former TVBC States employees. • Departments’ filing systems that are not in order or unclear documents that are submitted to GPAA have a negative effect on the pension pay-out process and timeframes, as such challenges would lead to documentation being sent back and forth.

11. FINDINGS Customary and civil marriages disputes • Some employees who are in customary marriages would get involved in a civil marriage without the knowledge of the 2 wives - in a case of death where an employee did not update his beneficiary profile, this results in a legal battle as GPAA would require proof of the marital status of both partners. • Some employees do not nominate beneficiaries because of fear that their family members might wish them dead and/or even kill them. In this regard, in the event of death, in some instances close and remote relatives of the deceased complicate the pay-out process by trying to claim the benefits for themselves or claim to act on behalf of ill-informed decedents and dependents. • The implications of not updating pension beneficiary forms and not sorting out issues pertaining to marriage and living arrangements by employees contribute greatly to delays in the pension pay-out.

12. FINDINGS • Awareness of the service termination and pension pay-out processes • 68% of retirees that participated in the study indicated that they were aware and informed of the service termination process by their departments and were getting feedback from GPAA on progress with their applications for pension pay-out. • However, 32% of retirees who participated in the study stated that they were not informed by their departments nor the GPAA about the progress of the pay-out processes and the challenges that might be encountered - they only became aware when they were experiencing delays in receiving their pension pay-outs. • The lack of awareness of the processes leads to application forms not being properly completed and insufficient supporting documentation being submitted to GPAA for pension pay-out. This will surely delay the pension pay-out process.

13. FINDINGS Feedback communication from GPAA to stakeholders • Feedback on progress and problems is received by the retirees and/or beneficiaries of deceased employees only when they call or walk into GPAA offices. • The problems range from incomplete forms or incorrectly completed forms, unclear bank stamps, and/or inconsistencies related to the details of the applicant against the banking details indicated in the forms. E-Channel equipment requirements • The e-Channel system that departments are supposed to use when submitting pension forms require more bandwidth, high volume scanners and computers with high capability, which some departments do not have.

14. FINDINGS Structure of departments • The centralised HR processes for big departments create a problem for the completion of the pension pay-out process. • The greatest challenge is with those regional offices in the deep rural areas where there is poor or no internet connection and post office services take place once or twice a month. • In trying to address this problem, the PSC was informed that GPAA has introduced mobile offices which cater for the needs of rural areas. All Provinces use the mobile office service - in small-medium provinces there is 1 mobile office and the bigger provinces have 2. Information about the routes of this mobile offices is sent to Premiers offices and also advertised through local media.

15. FINDINGS Other challenges that were indicated were: • Divorce cases - in some cases the retirees will contest the lesser amount they receive, forgetting the conditions of the divorce decree that allows for a 50% sharing – thus creating a debt for the retiree. • Medical aid - According to the provisions of GEPF member’s guide, when an employee has completed fifteen years of service and/or above, he/she is entitled to the post retirement subsidy of medical aid. If there are delays in the submission of the pension pay-out claim, this will have a negative effect on the processing of the post-retirement medical aid benefits.

16. FINDINGS Objective 2: Challenges experienced and best practices in managing service termination and pension pay-out Departments: • Reluctance or refusal by employees to submit or re-submit the required documents; • Difficulty in obtaining beneficiaries or family members of the deceased employees’ information, in a case where children are minors and no adult is nominated to act as a guardian/surety for the children. • The unavailability of good working scanners for HR officials to scan documents into a single file with attachments and submit to GPAA, to avoid rejection of the applications due to non availability of supporting documents. • Unavailability of GPAA Client Liaison Officers (CLO) sometimes when needed, due to their commitments since they service several departments.

17. FINDINGS GPAA: • Some employer departments do not use the e-Channel system but rely on the Client Liaison Officers (CLOs) to submit forms for GPAA. • GPAA is depending upon the employer departments to provide accurate information about the pension member and his dependants/beneficiaries. NB: All these challenges have a negative impact on the 60 days turnaround time and they create inconsistencies regarding payment processes. Best practice: • The National School of Governance (NSG) and the Department of Defence have a clear retirement plan and/or programme, which is catered for within their HRM plan. • The programmes offered by the NSG and Department of Defence may be regarded as ideal programmes with a holistic approach to preparing individuals after paid work ends, not just financially but in all aspects of life.

18. FINDINGS Best practice continues • At the NSG, once the prospective retirees are identified, an electronic notification is created for all individuals who are involved in the retirement process. Workshops are conducted to address issues including advice on financial, health, wellness and other relevant topics. The programme is also extended to the beneficiaries of the retirees to informed them about the importance of a smooth retirement process and the procedures to be followed to accomplish a smooth transition. • At the Department of Defence, it was indicated that given the nature of their work, a decision was made that employees who are due for retirement should be reskilled so that they may still be active in society. An amount of R15 000.00 is allocated for each retiree to be reskilled and be prepared for retirement. The reskilling programme is aimed at developing skills in areas such as farming, running a small business. This initiative indicates the extent to which the department values its employees and wishes to see them living fruitful and fulfilled life after retirement.

19. FINDINGS Objective 3: Impact of pension pay-out delays on the welfare of retirees and their dependents • Some retirees’ medical aids were cancelled due to non payment of monthly subscriptions. • Some retirees or beneficiaries of deceased employees could not feed their families, pay for children’s school, and/or lost their possessions. • Other retirees became victims of loan sharks and found themselves in deep financial crisis which was worse than when they were working. • Some decedents and dependents of retirees, in trying to help the situation, ended up in criminal activities. NB: It should be noted that some employees who went on retirement between 1996 and 2013 experienced more problems as compared to employees who went on retirement from 2013 until 2015. The problems during the 1996 to 2013 period could be attributed to various factors, ranging from questionable pension years, GPAA’s unclear and problematic systems, up to dependants/beneficiaries not claiming their benefits, etc…

20. FINDINGS Objective 4: The role of stakeholders involved with the pension pay-out • Government Pension Administration Agency (GPAA) Manages and administers pensions and other benefits for government employees in South Africa. • Banks The Banks are responsible for the verification process of declaring whether the bank account belongs to the principal member or the beneficiary as per the records sent to GPAA. • SARS SARS is responsible for collection of Tax Revenue in South Africa. If an employee failed to submit tax returns during his/her employment time that could have an impact on the processing and finalisation of his/her pension pay-out.

21. RECOMMENDATIONS • Structured, planned and compulsory training on all HR processes, especially for service termination and pension pay-out processes must be provided by departments or the NSG and DPSA as the custodian of the Public Service HRM framework. • The GPAA in collaboration with departments should create a database of unclaimed pension benefits by dependants or beneficiaries and employ a tracing agent to find the dependants or beneficiaries and process their claims. • Departments should submit details of pension members or beneficiaries who have not claimed their pension to GPAA to add to the work of the tracing agent. • Big national departments such as Labour, and Water and Sanitation that have provincial and regional offices across the country should decentralise some HR functions, especially processes related to service termination and pension pay-outs.

22. RECOMMENDATIONS • Departments, in collaboration with GPAA and SARS should implement awareness campaigns continuously for the benefit of newly appointed employees and long-term serving employees to ensure a thorough understanding of the processes, income tax issues and legislative changes. Where possible, dependants and/or beneficiaries should be invited to the information sessions with the consent of pension members. • Departments should also set aside financial resources to upgrade their IT systems to enable them to be compatible with the GPAA e-Channel system. • Departments and GPAA must collaborate to put in place a strategy to communicate with and provide feedback and support to retirees, dependants and beneficiaries of deceased employees until finalisation of the pension pay-out process.

23. CONCLUSION The overall conclusion from the study is that: • There are challenges in some departments that lead to delays in the processing of service termination and pension pay-outs even though they are not in big scale. However, the impact of those challenges is huge and severe to the retirees, their dependants and/or beneficiaries, especially the beneficiaries of deceased pension members. • Challenges are not caused by the absence of policies and procedures, but the human factor and historic challenges of record management especially from the TBVC States. • HR practitioners are aware of role they play in managing beneficiary profiles, but there is an acknowledgment of limited powers as they cannot force individual employees to nominate beneficiaries and they cannot even verify if the information provided is accurate. • Retirees and dependants/beneficiaries of deceased members must be supported in completing and submitting pension withdrawal applications to GPAA.

24. PROGRESS UPDATE • Media briefing by the PSC, to create a platform to popularise the findings and recommendations of the study, there by raising awareness among retirees and beneficiaries. • The PSC engaged with GPAA on the findings and recommendations and this resulted in a decision to assign a special channel for PSC to forward the complains as received. • The PSC received approximately 300 cases which were forwarded to GPAA and many (+ 80%) were resolved, and some are still being attended to. • There was also an engagement between PSC, GPAA and the leadership of SAPS, because many of the complaints received after the media briefing came from SAPS retirees and beneficiaries. • GPAA has incorporated some of the PSC’s recommendations in their strategic approach in addressing some of the challenges identified by the PSC. • The PSC continues to receive complaints from affected parties and these are forwarded to GPAA. The PSC and GPAA engages on a regular bases to monitor progress on the cases referred.

25. Thank you Siyabonga PSC Website: www.psc.gov.za National Anti-Corruption Hotline for the Public Service: 0800 701 701