ON THE MONEY
STUART THEOBALD: PIC’s wobbly investment decisions hit taxpayers, not pensioners, below the belt
One fact is often missed about the Government Employees Pension Fund (GEPF): it is a defined benefit scheme. Public servant pensioners get a set of benefits each year that are predetermined. Last year, R88.3bn was paid to over 430,000 retirees. These benefits are guaranteed by the employer, in other words the government. The Public Investment Corporation (PIC) manages a large portfolio to meet this liability. But if the PIC makes a hash of managing these assets, it is not pensioners who suffer. Their monthly payouts and medical costs are guaranteed. Last year, the government contributed R42.1bn to the fund, an amount that would have been much higher if investment returns had been weaker. Investment income for the period was R75.2bn – a yield of 4.5% on assets of R1.67-trillion. When the PIC makes a bad investment for the GEPF, the investment returns are lower and the amount the government contributes has to be higher. Weak investment returns directly translate into higher costs for ...
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