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Proposed Dispensation for the Recognition of Pensionable Service for NSF Members to the

This document outlines the proposed dispensation for recognizing pensionable service for NSF members to the Portfolio Committee of Finance on 3 September 2003, including background, concerns raised, subsequent calculations, a new scenario, revised proposed dispensation, and the rationale for the proposed changes.

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Proposed Dispensation for the Recognition of Pensionable Service for NSF Members to the

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  1. Proposed Dispensation for the Recognition of Pensionable Service for NSF Members to the The Portfolio Committee of Finance 3 September 2003

  2. Background • Originally 5 scenarios were proposed. - Category A represents members with less than 10 years of service prior to integration with an average age of 23 years at time of integration.   - Category B represents members with service between 10 years and 20 years, with an average age of 33 years at time of integration. - Categories C and D represents older (average ages 43 and 53) members with more than 20 years of recognizable service in a non-statutory force. • Option 5 was the dispensation approved by Cabinet and negotiated in PSCBC

  3. Background • Financial implications as at 31 May 2000. • The total cost for scenario 5 is R766 million as at 31 May 2000. • The member portion represents the current 7.5% employee contribution. • Employer contribution represents current 15% employer contribution.

  4. Portfolio Committee – 27 January 2003 Concerns raised by the Portfolio Committee • Not comfortable with proportional recognition in respect of Category A (33%) and Category B (80%). Would prefer 100%. • Employee contribution should be reduced or eliminated. • Smoother transition between categories should be considered. • Projections required for broader dispensation (SAPS, NIA etc) • Legal opinion to be obtained on the authority of the Portfolio Committee to reject or amend the proposal.

  5. Subsequent Calculations presented to Portfolio Committee on 28 May 2003 • Variations of Scenario 1 (100% compensation) and scenario 5 (PSCBC and cabinet approved proportionate representation) • Total cost with additional 3 000, 6 000, 9 000 members • For each category of members, cost to Employer with Employee contribution reduced to 5%, 3% and 0% (compensated by increased employer contribution). • Comparison of benefits between former NSF and former SADF members. • Cost of recognising a level percentage of 75%, 80%, 85% and 90% of NSF service for all former NSF members • Total cost with additional 3000, 6000 and 9000 members, with no employee contribution • Comparison of above with previous scenario 1 calculations with no employee contribution

  6. Calculations requested subsequent to Portfolio Committee meeting on 28 May 2003 New Scenario (Scenario 6) • 100% recognition of service for members in category B, C and D. • 50% recognition for category A. • Category A is to be expanded to include all members (where previously post 1990 were 0% recognition). • The total cost calculated for 0%, 3%, 5% and 7.5% member contribution rates. • Benefit comparison to former SADF members

  7. Revised Proposed Dispensation Scenario 6 at 5% expected member contribution rate Comparison to originally agreed Scenario 5 • Service recognition comparison • Financial Comparison • Benefit Comparison • Funding

  8. 1) Service recognition comparison

  9. 2) Financial Comparison

  10. 3) Benefit Comparison

  11. 4) Funding R1.5 billion that was set aside from the GEPF during 1998 • So far various initiatives have identified approximately R588m (excluding NSF) on the R1 500m • Extending proposed dispensation to former NSF members of the SANDF will place further burden of R768m (Total R1.35 bn).

  12. Rationale for proposed dispensation • Accommodates as far as possible previous concerns • Consistently more attractive than the previously agreed Scenario 5 (contributions and the benefit comparison). • Members contribute at a 33% discount to the current member contribution rate of the GEPF. • Members are affectively contributing below 24% to the total cost • Has no disparity for category B, C, and D members (assuming that they contribute). • Category A members are expanded on to recognise post 31 December 1990 members. • Category A members will recognize between 92% and 94% of a comparative SADF member. • Is within budgetary constraints

  13. Way Forward • Amendment to the Bill – Post 31 December 1990 members • Rule amendments • Resolution 12 of 2003 negotiated in PSCBC will need to be renegotiated insofar as NSF recognition is concerned • Rule changes will need to be gazetted

  14. Thank You

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