1. TRANSNET SECOND
DEFINED BENEFIT FUND
15 NOVEMBER 2011

2. Transnet Second Defined Benefit Fund
INTRODUCTION
Fund is currently solvent with a surplus of R2.7 billion
Fund has been well managed up to now
Fund cannot afford to implement all of PC recommendations
Fund can almost implement two of the three recommendations by the PC (68% of CPI subject to affordability plus two of the 5 months backpay and another month proposed for November 2011)
Fund cannot afford both 75% of CPI subject to affordability pension increases and current bonus structure
The Trustees cannot propose/approve a rule amendment that causes an unsound financial position
Transnet Second Defined Benefit Fund

3. Transnet Second Defined Benefit Fund
FUND FINANCIAL POSITION (R ‘bn)
Inception
March
2002
2004
2006
2008
2010
2011
Assets
19.9
16.0
15.1
19.2
19.7
18.8
Liabilities
17.9
19.0
18.5
22.2
16.9
16.1
Surplus/
(Deficit)
2.0
(3.0)
(3.4)
2.8
2.7
Funding level
111.4%
84.5%
81.4%
86.5%
111.1%
116.8%
117.0%
Transnet Second Defined Benefit Fund

4. Assets 18.8 Liabilities 16.1 19.3 20.1 20.8 24.0 Surplus/(Deficit) 2.7
TSDBF CANNOT AFFORD PC RECOMMENDATIONS
Scenario (R’bn)
Current
75% CPI only
75% CPI plus 5m backpay
75% CPI plus 5m backpay and uplift
75% CPI plus 5m backpay, uplift and bonuses
Assets
18.8
Liabilities
16.1
19.3
20.1
20.8
24.0
Surplus/(Deficit)
2.7
(0.5)
(1.3)
(2.0)
(5.2)
Funding level
117.0%
97.5%
93.4%
90.6%
78.5%
Total cost of PC recommendations R4.7 billion (2nd last column)
Total cost incl. bonuses of PC recommendations R7.9 billion (last column)
Transnet Second Defined Benefit Fund

5. Transnet Second Defined Benefit Fund
FUND CAN ALMOST IMPLEMENT 2 OF THE 3 PC RECOMMENDATIONS
TSDBF already implemented two of the five months back pay since discussions commenced
TSDBF Board approved a 10% bonus for November 2011 (Transnet Board still need to approve) covering more than another month’s backpay
TSDBF trustees are giving serious consideration to a 68% of CPI increase subject to fund affordability
TSDBF cannot continue the current bonus structure as well as an improved CPI linked pension increase policy
TSDBF cannot implement the 68% of CPI subject to affordability pension increase policy and continue to pay future bonuses
The 3.2% uplift cannot be afforded
There may be conflicting views from pensioners groupings on whether CPI linked pension increases or bonus payments are preferred.
Transnet Second Defined Benefit Fund

6. Transnet Second Defined Benefit Fund
IN CONCLUSION
TSDBF already implemented two of the five months back pay since discussions commenced and another bonus payment is proposed for November 2011
This equals three months out of the five months back pay recommended by the PC
TSDBF can implement an improved 68% of CPI subject to affordability pension increases subject to affordability immediately without unnecessary delay OR the current bonus structure
Transnet Second Defined Benefit Fund

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Transnet Second Defined Benefit Fund