Surplus? What is Surplus? Did the pension funds second amendment act achieve its aims ?
Journal Article
2012
Permanent link to this Item
Authors
Journal Title
South African Actuarial Journal
Journal ISSN
Volume Title
Publisher
Acturial Society of South Africa
Publisher
University of Cape Town
Department
Faculty
Series
Abstract
The Pension Funds Second Amendment Act, 2001 required funds to provide statutory minimum benefits for exiting members and pensioners. Any surplus arising at the statutory valuation following the promulgation of this Act was to be distributed—initially to former members and pensioners to top up their benefits to the statutory minimum, and then equitably to all stakeholders. Surplus available in retirement funds was originally estimated at R80bn, but the surplus distributed by May 2012 was only about R47,6bn. This paper considers some reasons for this discrepancy and, in particular, gives an analysis of 447 surplus valuation reports. It shows that, by strengthening their valuation assumptions and motivating contingency reserves, actuaries reduced the surplus by R10bn for these 447 funds. The paper questions whether the strengthening of valuation bases was justified and examines critically the new actuarial methods introduced following the promulgation of the Act.
Description
Keywords
Reference:
Davis, R. W. D., & Kendal, S. (2012). Surplus? What surplus? Did the Pension Funds Second Amendment Act achieve its aims?. South African Actuarial Journal, 12, 97-128.