PSPF IN E10BN DEFICIT BUT ACCOUNT HEALTHY

LOBAMBA – If all the current civil servants can retire, PSPF can be in a shortfall of E10 billion on pension but because the funding is not needed urgently, the fund’s account is currently healthy.

This was revealed by the Principal Secretary (PS) in the Ministry of Public Service Sipho Tsabedze on behalf of the Public Service Pensions Fund (PSPF), when the ministry made its second appearance before the Public Accounts Committee (PAC) yesterday. Findings of the Auditor General (AG) Timothy Matsebula, on the fund depict that the actuarial valuation of the fund reflected a deficit amounting to E10 139 135 000 in the financial year ended March 31, 2021. An actuarial valuation is an analysis that compares the assets and liabilities of a pension plan. Matsebula said he raised his concern that an excess of liabilities over assets resulted in the deficit and this affected the long-term sustainability of a defined benefit pension plan. He stated that this deficit meant that the amounts contributed consistently by government employees and the government, when combined with investment earnings, may not be sufficient to pay promised benefits in full, over the long-term.

warned

“I warned that the results of the actuarial valuation of past services indicate that total liabilities amounting to E37 592 711 000 exceeded the actuarial value of assets of E27 453 576 000 by E10 139 135 000. Since assets are used to finance liabilities, this indicates that the level of funding was only 73 per cent in the year under review, and there was a short fall of 27 per cent which may end up requiring additional financing through increased employees’ contributions, submitted through the audit compliance report,” he said. Through the audit report, Matsebula said the implication of this deficit was that the contribution rate required to eliminate the past service deficit over the next 15 years was 13.3 per cent of the pensions emoluments, as it was reflected in the auditors’ reports.

Further, he said the contribution rate required in order for the fund to attain financial soundness over the next 15 years was 41.5 per cent of the pensionable emoluments. He said in normal circumstances, pension fund deficits were required to be eliminated over a much shorter period, than the future working lives of current employees. “I raised my concern on the effects that the increase in contributions may have in the economic lives of the government employees and the effects of the deficit in their future benefits, upon retirement. I sought an explanation on how this deficit will be financed without affecting negatively the lives of the government employees who may be required to finance the short-fall or lose their future earnings if the deficit problem is not rectified,” he submitted.

inception

PS Tsabedze said since the inception of the fund back in 1993, they started off with a deficit which was at a level of 28 per cent. He said this was because of the nature of the fund, making an example that when a government employee died two weeks into employment, their beneficiaries would get his salary for the next 24 months, yet the person had contributed nothing to the fund. Tsabedze said over the years, they had invested the pensioners’ money into profit generating businesses, which helped to slim the deficit and it had improved to 80 per cent, leaving a 20 per cent gap. He added that, although the deficit was a huge sum, the account of the fund was currently healthy because the money was not urgently needed.

purchased

On that note, this publication reported yesterday that a company owned by the fund had purchased the incomplete Swaziland Association of Savings and Credit Cooperatives (SASCCO) Commercial building in Mbabane, which has become an eyesore in the capital city, for E35 900 000. Tsabedze also shared that government was now the guarantor of the fund deficit and because it was perpetual, they did not foresee the 20 per cent gap being demanded from government. PAC Chairman and Gege Member of Parliament (MP) Musa Kunene, wondered what drove government to make the commitment that if an employee died early into employment, they would have their salary paid to that persons beneficiaries for two years. “This commitment from government makes it seem as though they are an insurance company or anything closer to that; what really pushed them to make that commitment. Was it because it was trying to stop employees from preferring the private sector over it,” he wondered. In response, Tsabedze said government was trying to show that under its employment, one was guaranteed better benefits and their beneficiaries to be well taken care of after they died.

competitors

The PS said the fund was the best and well managed entity compared to its competitors in the country and he submitted that, sometimes they were astonished when pensioners wanted the fund to be an independent body, because government was putting all the effort in making it viable and sustainable. “Government can remove itself from running the entity but the operations of the entity would be grossly affected. There are talks that there is mismanagement of funds at the entity but the AG has done his audit and found nothing,” he said. Tsabedze mentioned early in his speech that there was a discomfort from the ministry when addressing matters of the fund because of the nature of the issues.

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