NATAL JOINT MUNICIPAL FUNDS PRESENTATION TO THE MEMBERS’ INFORMATION MEETING 2 MARCH 2018 Arthur Els
NATAL JOINT MUNICIPAL FUNDS Agenda Provident Fund Superannuation Fund Retirement Fund
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND INTERIM ACTUARIAL VALUATION AS AT 31 MARCH 2017 Arthur Els
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Membership
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Assets R’000
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Developments during valuation period • Investment return of 5.8%. o Unallocated assets of 5.3% from 2016 valuation o Total bonuses 8.8% compound o Balance of 3.5% applied in subsequent bonuses
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Bonuses declared over 12 months Month Interim Investment bonus Reserve April 2016 1 1.0% 7.0% May 2016 1.5% 7.0% June 2016 1.5% 7.0% July 2016 1.5% 7.0% August 2016 0.5% 7.0% September 2016 0.5% 7.0% October 2016 0.5% 7.0% November 2016 0.5% 7.0% December 2016 0.5% 7.0% January 2017 0.5% 7.0% February 2017 0.0% 7.0% March 2017 0.0% 7.0% Subtotal 8.82% 1. Cost of this bonus included in the previous interim valuation results
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Returns earned vs bonuses from 2000 to 2017
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Asset composition (%) 100.0 80.0 60.0 45.8 40.0 22.3 17.9 20.0 10.8 5.3 1.0 0.0 -3.0 -20.0
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Investment strategy Strategic asset allocation Local Equities 45.0% Foreign Equities 20.0% Cash 3.0% Fixed interest 22.0% bonds Property 10.0%
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Valuation Results 31 March 2017 31 March 2016 R'000 R'000 Total assets per Financial Statements 3 486 263 3 016 932 Liabilities: Member Share Account: As per Financial Statements 3 123 341 2 626 565 Actuarial adjustment 1 3 524 5 036 Bonus for April following valuation date 0 26 316 Subtotal 3 126 865 2 657 917 Reserves and Accounts: Risk & Expense Reserve 22 793 20 196 Investment Reserve 218 881 186 054 Subtotal 241 674 206 250 Total liabilities, reserves and accounts 3 368 539 2 864 167 Unallocated assets 117 724 152 765 Funding level 103.5% 105.3%
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Contribution Rate Category A Category B Category C Retirement contributions Member contributions 5.00% 7.00% 9.25% Employer contributions 6.00% 9.90% 14.25% Total 11.00% 16.90% 23.50% Risk and expense contributions Employer: 3.75% 3.75% 3.75% Percentage of members contributing at these rates: 31 March 2017 35.00% 21.09% 43.91% 31 March 2016 41.20% 23.41% 35.39%
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Risk Reserve contribution assessment 31 March 2017 31 March 2016 Risk and expense contributions 3.75% 3.75% Less: Death benefit cost 0.97% 1.00% Expenses 0.83% 1.10% Excess contribution 1.95% 1.65%
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Risk Reserve sufficiency Year following 31 March 2017 Risk and expense contributions 3.75% Less: Death benefit cost 1.89% Expenses 1.00% Excess contribution 0.86% Available contributions sufficient to meet costs and expenses Per Trustee decision, excess used to enhance retirement benefits
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Recommendations and decisions • No final bonus as at the valuation date. • Retain Risk & Expense Reserve of R 22 793 000 in line with PF117 • Investment Reserve remains at 7% • Continue education programme on benefit of higher contributions towards retirement
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Conclusion • Fund financially sound • Contribution towards risk and expenses sufficient benefits • Asset composition appropriate • Investment strategy suitable • Fund self insurance arrangement appropriate
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Developments after valuation date • Investment earnings to Jan 2018: 10% • February likely to be negative • Plus 3.5% c/f per valuation • Bonuses to Jan 2018: 7.7%
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Bonuses declared since 1 April 2017 Month Interim Investment bonus Reserve April 2017 0.0% 7.0% May 2017 1.0% 7.0% June 2017 1.0% 7.0% July 2017 1.0% 7.0% August 2017 0.0% 7.0% September 2017 0.0% 7.0% October 2017 0.0% 7.0% November 2017 1.5% 7.0% December 2017 1.5% 7.0% January 2018 1.5% 7.0% February 2018 1.5% 7.0% March 2018 1.5% 7.0% Subtotal 10.99%
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Developments after valuation date • Investment earnings to Jan 2018: 10% • February likely to be negative • Plus 3.5% c/f per valuation • Bonuses to Jan 2018: 7.7% • Trustees investigating creation of pensioner account for retirees
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Questions?
KWA-ZULU NATAL JOINT MUNICIPAL PROVIDENT FUND Thank You
NATAL JOINT MUNICIPAL PENSION FUND (SUPERANNUATION) STATUTORY ACTUARIAL VALUATION AS AT 31 MARCH 2017 Arthur Els
NJMPF – SUPERANNUATION FUND Membership
NJMPF – SUPERANNUATION FUND Assets R’000
NJMPF – SUPERANNUATION FUND Asset composition (%) 90.0 70.0 50.0 39.2 26.7 30.0 24.2 10.0 4.9 4.6 -0.7 -10.0
NJMPF – SUPERANNUATION FUND Investment returns Date Investment return 31 March 2015 1 14.92% 31 March 2016 5.86% 31 March 2017 6.01% 1. Including the release of the investment reserve
NJMPF – SUPERANNUATION FUND Average salary increases Date Salary Increase (p.a.) 31 March 2015 8.07% 31 March 2016 8.60% 31 March 2017 8.11%
NJMPF – SUPERANNUATION FUND Pension Increases CPI for year to Average CPI for year Date Pension Increase 31 March to previous 31 Dec 1 July 2015 6.07% 4.0% 6.07% 1 January 2016 8.33% 1 July 2016 4.68% 6.3% 4.58% 1 July 2017 6.84% 6.1% 6.76% 1. CPI changed from average to year-on-year wef 2017
NJMPF – SUPERANNUATION FUND Pensioners - Developments over 3-year valuation period • Suspended pensioner data exercise implemented • Special 8.33% increase granted 1.1.2016 in lieu of 13 th cheque
NJMPF – SUPERANNUATION FUND Results: Pensioner Memorandum Account 31 March 2017 31 March 2014 R'000 R'000 Memorandum Account: Pensioners Assets: 5 245 567 4 005 403 Liabilities and Reserves: Accrued liability 4 253 217 2 945 052 Additional liability: suspended pensioners 0 0 Risk Reserve 93 484 68 859 Solvency Reserve 612 357 313 026 Balance of assets 286 509 678 466 5 245 567 4 005 403 Funding level 105.8% 120.4%
NJMPF – SUPERANNUATION FUND Conclusion: Pensioners • Memorandum Account is fully funded • Grant prescribed minimum pension increase to qualifying pensioners in terms of the Act
NJMPF – SUPERANNUATION FUND Financial Position: Active members 31 March 2017 31 March 2014 R'000 R'000 Active members Assets: 5 808 471 4 505 433 Liabilities and Reserves: Accrued liability 5 011 966 4 179 439 Risk Reserve 68 430 85 027 Contribution reserve 21 221 59 871 Prescribed minimum benefits 382 436 146 190 Solvency Reserve: Active members 324 418 34 906 5 808 471 4 505 433 Surplus/(Deficit) 0 0 Funding level (after Solvency Reserve) 100.0% 100.0% Funding level 100.0% 100.0%
NJMPF – SUPERANNUATION FUND Solvency Reserve Members Pensioners R' 000s R' 000s Liability: Solvency Reserve assumptions 6 468 162 4 865 574 Liability:Valuation assumptions 5 394 402 4 253 217 Solvency Reserve 1 073 760 612 357
NJMPF – SUPERANNUATION FUND Required rate of contribution 31 March 2017 31 March 2014 Required rate Future service benefits 29.90% 30.34% Expenses 1.20% 1.25% Total 31.10% 31.59% Actual rate Local Authorities 21.63% 21.63% Members 9.25% 9.25% Total 30.88% 30.88% Shortfall/excess in contributed rate -0.22% -0.71% Surcharge payable by local authorities 0.0% - 9.5% 9.50%
NJMPF – SUPERANNUATION FUND Surcharge • Fund assets insufficient for full Solvency Reserve for active members • If no Solvency Reserve held, Fund has little protection against adverse experience • I recommend that: o Fund holds full Solvency Reserve to protect members o Continue to pay surcharge to fund shortfall
NJMPF – SUPERANNUATION FUND Recommendations: Active members • Aim to build up the Solvency Reserve • Continue to pay current surcharge • Retain Risk Reserve of R 161 914 000 in line with PF117 • Retain Contribution Reserve of R 21 221 000 to cover small deficit in contribution rate
NJMPF – SUPERANNUATION FUND Conclusion • Fund financially sound for FSB purposes (before allowing for Solvency Reserve) • Not fully funded on financial soundness basis (incorporating full Solvency Reserve) – steps taken • Asset composition date appropriate to nature of the liabilities • Investment strategy suitable • Reinsurance arrangements appropriate
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