DE BEERS PENSION FUND: SURPLUS DISTRIBUTION AS AT 1 MARCH 2013
Questions and answers related to the above-mentioned surplus distribution
1. What is the amount of the surplus in the Fund?
The surplus as at 1 March 2013 was R174.2 million.
This amount will change depending on investment returns earned between
1 March 2013 and the date on which surplus benefits are allocated (the surplus
apportionment date is 1 November 2014).
2. Will the surplus be adjusted for investment returns between 1 March 2013 and the
date the payment is made?
Yes, the surplus will be adjusted for investment returns from 1 March 2013 to the date on
which surplus benefits are allocated. In addition, late payment interest will be paid from
the allocation date to the actual date on which payment is made.
3. Where exactly did the surplus come from?
The Trustees, after taking advice from the Fund’s Actuary, from time to time establish
reserve accounts to assist in ensuring that the Fund will remain in a sound financial
condition under most circumstances. When the Actuary performs the actuarial valuation
every three years, he makes recommendations regarding the amounts that should be
held in these reserve accounts to provide for unforeseen expenses associated with, for
example, large legal expenses or capital expenditure by the Fund. Sometimes as a result
of changed circumstances and/or investment growth, the balances in one or more of the
reserve accounts are higher than the Actuary believes will be required and the surplus
can then be released (as is the case in this instance).
As at 1 March 2013, the Actuary confirmed that R174.2 million could be released from
the Fund’s reserve accounts as surplus as this amount was no longer required. Of this,
R14.8 million came from the “DC (Section) reserve accounts” (see below) and
R159.4 million came from the “Fund level (the Fund as a whole – DC, DB and Pensioner
Section) reserve accounts” (see below).
What factors did the Trustees consider to determine how the surplus would be
distributed?
The Trustees considered a wide range of factors in determining a fair and equitable
distribution of surplus, amongst others the following:

The Fund Rules, the Pension Funds Act and guidance issued by the Financial
Services Board;

Where the surplus came from;

The financial history of the Fund;

The risks borne by the various stakeholders (pensioners, active members, former
members and the employers);

How the surplus at the previous Fund surplus apportionment dates was distributed;
and

The rights and reasonable benefit expectations of the various stakeholders.
What are the “DC reserve accounts” and “Fund level reserve accounts”?
Certain reserve accounts were established for the specific benefit of defined contribution
(DC) members and DC members alone contributed to the build-up of these reserve
accounts – these are referred to as the DC reserve accounts and the surplus released
from the DC reserve accounts is referred to as the “DC surplus”.
Other reserve accounts were established for the benefit of all Fund stakeholders
(including in-service members, living annuity pensioners, life annuity pensioners,
deferred and paid-up pensioners and employers). These reserve accounts were
established as part of the first surplus apportionment as at 1 March 2007 and were
funded out of the assets available in the Fund at that time. These are referred to as the
Fund level reserve accounts and the surplus released from the Fund level reserve
accounts is referred to as the “Fund level surplus”.
As the surplus arose from different sources, the Trustees decided to consider the
distribution in respect of the DC surplus and Fund level surplus separately.
4. How will the costs associated with the distribution of the surplus be funded?
There are costs involved in considering and making a surplus distribution. These include
legal and actuarial fees, communication costs and the costs of tracing and making
payments to former members who have left the Fund. Current members and pensioners
should not have to fund these costs alone and these costs will therefore be funded out of
the surplus prior to distribution.
5. How will the surplus be distributed?
After careful consideration, and taking the interests of all stakeholders into account, the
Trustees unanimously agreed to the following distribution:
Description
Surplus as at 1 March 2013
Expected surplus distribution
costs
Net surplus after surplus
ditribution costs
DC Section
surplus
R’000
Fund level
surplus
R’000
Total
surplus
R’000
14 805
159 454
174 259
(74)
(798)
(872)
14 731
158 656
173 387
Allocations
The Employers
% of total
0
79 328
79 328
45.8%
Members and former members (1)
14 731
79 328
94 059
54.2%
Total
14 731
158 656
173 387
100.0%
(1) This includes a total surplus data reserve of R940 000 (1% of the member allocation)
which will stay in the Fund and be used in case there are any additional payments
required if members or their beneficiaries are incorrectly excluded as a result of the
Fund not having the correct data for them.
6. Who has been included in the distribution?
The following groups of stakeholders have been included in the distribution of DC
Section and Fund level surplus:
DC Section surplus:




In service DC members as at 1 March 2013 who remained in service as at
1 November 2014;
Former DC members, other than those who joined the Fund after 1 March 2013, who
retired in the Fund or became DC paid-up members between 1 March 2010 and
1 November 2014;
DC members, other than those who joined the Fund after 1 March 2013, who left the
Fund (through any means other than death) between 1 March 2010 and
1 November 2014, subject to their share of surplus being more than R260. This is
based on the Trustees distribution methodology in terms of which the minimum
deemed administration cost of a surplus allocation payment to a former member is
R260. It therefore is not logical to make a payment where the cost of making the
payment is more than the amount paid; and
Former DC members, other than those who joined the Fund after 1 March 2013, who
retired in the Fund or became DC paid-up members between 1 March 2010 and
1 November 2014 and died during this period and where a continuation pension is
payable to a dependent as at 1 November 2014.
Fund level surplus:

The Employers;

Members (DB and DC) as at 1 March 2007 who were still in the Fund (as either
working members, pensioners or living annuitants, deferred or paid-up pensioners)
as at 1 November 2014;
In–force pensioners (including life annuitants, living annuitants and deferred
pensioners, both DB and DC) as at 1 March 2007 who were still in-force as at
1 November 2014 or where a continuation pension is being paid to a dependent as at
1 November 2014;


In service members (DB and DC) as at 1 March 2007 who remained in the Fund as at
1 March 2010 but had left the Fund (through any means other than death) between
1 March 2010 and 1 November 2014, subject to their share of surplus being more
than R260; and

In-force pensioners (including life annuitants, living annuitants and deferred
pensioners, both DB and DC) as at 1 March 2007 who remained in the Fund as at
1 March 2010 but died between 1 March 2010 and 1 November 2014 which resulted
in a continuation pension being payable to a dependent as at 1 November 2014.
7. Who has been excluded from the surplus distribution and why?
All stakeholders not listed above were excluded from the distribution, as they either:

Did not contribute to the build-up of the surplus – as an example, a member who
joined the Fund after 1 March 2013, did not contribute to the build-up of surplus and
will therefore not receive a share of the distribution;

Were DC members
1 November 2014;

Were former DC members who retired in the Fund (life or living annuitants) or
became DC paid-up members between 1 March 2010 and 1 November 2014 and
died during this period which did not result in a continuation pension being payable to
a dependent as at 1 November 2014;

Left the Fund prior to 1 March 2010 and were considered in a previous distribution;
and

Left the Fund after 1 March 2010 but would have been allocated a benefit of less than
R260 for the reason noted above.
who
died
in-service
between
1 March 2010
and
8. How will the surplus payments / allocations be made?
The surplus payment / allocation will be determined based on your status or category at
1 November 2014 (the distribution date).
Category of member on
1 November 2014
Manner of payment / allocation
In-service DC members
Added to Fund Credit
DC paid-up members
Added to Fund Credit
In-service DB members
DC Living annuitants
All Pensioners
DB deferred pensioners
Eligible former members/exits
(retirements, withdrawals
retrenchments and dismissals)
Exits (deaths)
Members who transferred to the
“Petra Funds”
Reflected as an Additional Voluntary Contribution (AVC)
on the member record
Added to living annuity capital account balance
A lump sum bonus pension payment equal to a 1.6 times
the monthly pension paid .This will be paid with the
November pension
Allocated as a pension increase of 0.4% with effect from
1 November 2014
Cash payment
N/A – no allocation
Allocation transferred to the benefit in the appropriate
Petra fund
Individual amounts due will be communicated to all members, pensioners and former
members in a separate communication.
Please note the following:

Members to whom an allocation from the DC surplus as well as Fund level surplus is
due will have these allocations combined and one payment / allocation will be made.

Members who have two Fund records will have their allocation combined which will
be allocated to the DC Fund Credit. Examples of this include:

o
Members with a DB deferred pension and a DC Fund Credit – the surplus
allocation will be added to the DC Fund Credit
o
Pensioners with a life and living annuity – the surplus allocation will be added
to the living annuity capital account balance.
Note that cash payments made will be subject to applicable taxes. Other allocations
to in-Fund accounts will not be taxable.
9. Can in-service members elect to receive their portion of the surplus apportionment
in cash?
In terms of both the Income Tax Act and the Pension Funds Act, the Fund is not allowed
to pay in-service members their allocation of the surplus as a cash benefit. In the case of
in-service DC members their surplus allocation will be added to their existing Fund
Credit.
10. How much of the total surplus has been allocated to each group?
For the DC surplus, the surplus distribution amounts due were based on each member’s
contributions between 1 August 2006 (the date of commencement of the DC section of
the Fund) and 28 February 2013.
For the Fund level surplus, the distribution amounts due were based on each member’s
share of the Fund as at 1 March 2007 (the first apportionment date).
The surplus allocated for the benefit of members and former members (R93 119 000)
has been allocated as follows:
Description on 1 November 2014
In-service DC members
DC paid-up members
In-service DB members
Living annuitants
Pensioners
DB deferred pensioners
Exits (retirements, withdrawals
retrenchments and dismissals)
Exits (deaths)
Members who transferred to the “Petra
Funds”
Total
*
Amount allocated as
at 1 March 2013 *
% of total
20 644
22.2%
2 859
3.1%
159
0.2%
3 822
4.1%
55 469
59.5%
81
0.1%
6 899
7.4%
0
0.0%
3 186
3.4%
93 119
100.0%
This amount will be increased with investment returns between 1 March 2013 and the
date on which the allocations are made.
11. What happens if the Fund cannot trace all of the former members?
Former members can only be paid a surplus benefit if:

Their calculated share of the distribution was more than R260 due the administrative
cost involved in making the payment as noted above;

They were alive on the surplus apportionment date (1 November 2014); and

They have been identified and traced by the Fund or the tracing agents employed for
this purpose, or have made contact with the Fund, by no later than 31 October 2017
(three years from the surplus apportionment date).
If surplus has been allocated to a former member and he or she has not claimed this
benefit within three years of the apportionment date, this surplus will be written back to
the Fund. The Trustees can then either decide to do another apportionment or (and this
is more likely considering the potential low value of the amounts involved) allocate the
unpaid amounts to one of the Fund’s reserve accounts.
12. Who do I contact if I have questions?
If you have any questions or queries regarding the above:
If you are a pensioner member, please contact Sonia Hendricks or Hemah Moodaley
as follows:

Telephone:
053 807 3222 (Option 1)

E-mail:
[email protected]
If you are a working member, please contact Wendy Chan Yan or Hemah Moodaley as
follows:

Telephone:
053 807 3222 (Option 2)

E-mail:
[email protected]