We have M5.7 billion: Pension Fund

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THE Public Officers’ Defined Contribution Pension Fund, established under The Public Officers’ Defined Contribution Pension Fund Act of 2008, is set to celebrate its tenth anniversary, beginning next month.

In this wide-ranging interview, Lesotho Times (LT) Reporter, Pascalinah Kabi, talks to Pension Fund Principal Officer, Thabo Thulo, on the Fund’s achievements and challenges in the 10 years of its existence. 

LT: Take us through the 10 years the Fund has travelled since it was introduced in 2008.  

Thulo: For a long time, government employees’ retirement packages were dealt with in terms of the old Pensions Proclamation of 1964.

Despite some amendments, government realised that it was an outdated law which did not have enough coverage for some categories of the civil servants.

There was no consistency as some civil servants only got a once-off lump sum payment while others who were on permanent and pensionable terms received monthly pensions and lump sum payments.

Furthermore, the formula used to determine the benefits left pensioners with much less amounts which were inadequate in relation to the standards of living.

The outdated 1964 law applied until 2008 when the 2008 Pensions Act came into force. Under the old law, the government was the sole contributor to civil servants’ retirement benefits but the government soon realised that the only way to improve those benefits was to put in place a contributory pension scheme where public officers also contribute to the Fund.

We conducted a study in 2005 on the feasibility of the new pension fund and in 2008, the government started the contributory pension scheme. The new scheme began by accommodating only those public servants aged up to 40 years.

Government contributed M600 million and in the following year, the government then included public officers aged 41 to 45 years in the contributory pension scheme.

This cost the government a further M500 million and so in total, the Fund grew to M1.1 billion.

The new law determined the rate of contributions by the government as 5 percent of each member’s salary while each member is also expected to contribute 5 percent of their salary.

Our assets kept on increasing and currently we have assets under management of about M5.7 billion. It is a lot of money and only about 5 percent of that money is invested locally.

We have also continued to award pension increases to our pensioners.

It is against this background that this year on 31 March, we will celebrate our 10th anniversary through a number of events.

Starting next week, we will be visible with our branded vehicles, billboards and other activities. We are going to celebrate in style.  

LT: M5. 7 billion is a lot of money. What have you done with the money to ensure that it is not only safe but makes good returns for members? 

Thulo: the Fund’s first financial statements were released in 2008/09 and that same year the Board of Trustees was established. The first board chairperson was the current Minister of Finance, Dr Moeketsi Majoro.

The board appointed a secretariat office and asset managers among others. The M1.1 billion was transferred to the asset managers to invest on our behalf and they have set benchmarks which they are supposed to adhere to ensure that we have good returns and most of the benchmarks are 5 percent above inflation.

The Fund started with two asset managers who were registered with the Central Bank of Lesotho.

At the time our membership was +/-20 000 and the members started contributing into the fund from 2008/09 building on the already accumulated benefits from prior service.

I must also mention that the M1.1 billion only relates to those people who were in service before 1 April 1 2008. In 2010/11, the Fund’s assets increased to M1.64 billion this was despite of the financial crisis at the time.

Our membership also grew to 31 000 with assets increasing to M2 billion in 2011/12 and this was also a positive sign. We also realised that we needed to invest more money locally. It was not easy at all and even though we are giving the money to local asset managers, they were still investing it outside the country. Part of this money – M100 million – was invested at Maseru Mall Project and we are the majority shareholders.

With our main mandate being that of getting the best returns for our members, we also invested millions to become the largest single shareholder at Pioneer Mall. The two malls are performing well and these are assets that we are proud of.

We went further to engage a private equity manager whose primary mandate is to identify local projects we can invest in and they have identified several projects, some of which are now fully functional while others are still at the feasibility stage.

Some people argue that all our money must be invested in Lesotho but for the purposes of risk and diversification, it is not wise to put all your eggs in one basket. So we have invested a reasonable amount in Lesotho, South Africa and abroad. While our primary mandate is to make good returns for our members, we also want to contribute to economic growth in our country by creating jobs and ensuring that money circulates in Lesotho.

We have further invested in our own property in 2016 – the Pension Fund House where we occupy one floor. The rentals collected go directly into members’ accounts. So we want to see more of these projects. 

LT: What are some of the challenges you faced in the 10 years of your existence? 

Thulo: The major challenge we experienced was having qualified accounts. Last year was not the first financial year we had qualified accounts. We first had qualified accounts in 2014/15 owing to the Maseru Mall Project whose structure the auditors questioned but this was addressed in the following year. In 2015/16 we also had qualified account due to outstanding money from the government and we are still waiting for commitment from government. The Fund’s actuaries have advised that the outstanding money could be paid in 20 to 30 years.

Another challenge is that we do not have accurate membership data. It is still a challenge for government ministries to keep accurate data and individual public servants’ files are only usually updated when they retire hence the constant delays in paying out their pension benefits.

One of the reasons government established the Pension Fund was to ensure that member’s pensions are speedily processed and paid up but the Fund is not able to do that as we rely solely on ministries to provide the data. It takes up to three months to process claims. For instance, I happened to know a member who died in May 2017 and their claim was only lodged this year.

I am citing this example for people to understand that the delay is not on the side of the Fund but government ministries as we rely on them to supply us with documents. We are working very hard together with Ministry of Public Service to have accurate data and slowly we will get there.

Another challenge is that of benefits statements that are not being issued to members as should be the case on an annual basis. We tried to do so but because of the inaccurate information, there were a lot of mistakes in the statements and we decided to put this on hold. We are however, making progress with a few ministries who have cleaned up their data bases and we are hoping that other ministries will follow suit. 

LT: What is your advice to the civil servants to ensure they get their full contributions and interests when they retire as most of them have their pensions slashed due to debts owed to government? 

Thulo: This has been a problem for a long time. What is supposed to happen is that HR offices are expected to audit civil servants’ files on a monthly basis but that is not happening. This is avoid incidents where a person can be overpaid and is not even aware of such overpayments.

These salary overpayments are unfortunately picked up when workers retire and the money is deducted from their benefits. The most painful thing is that the officer who overpaid them does not take the responsibility. So auditing members’ salaries on monthly basis will help pick such discrepancies and allow public servants settle such debts while they are still active in service. 

LT: What does the future look like for Pension Fund? 

Thulo: We would want to see a good part of the members’ money invested locally and making good returns while at the same time helping to grow the national economy. Currently we have assets under management of about M5.7 billion. It is a lot of money and only about 5 percent of that money is invested locally. The bulk of the money is still out there and we need it back so that we can invest it into projects which will boost our economy and create jobs for Basotho.

We are working hard to have an electronic version of members’ benefits statements to ensure that members know how much they have in a fund should they decide to retire. Each member will have a unique code to lock into the system. We hope this will be operational in the next financial year.

Let me conclude by reassuring our members that their future benefits are secure in the safe hands of dedicated professionals.

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