The Government Employees Pension Fund (GEPF) said its member benefits will not be impacted by the lower value of its investments arising out of the Middle East conflict
Image: Chatgpt
The Government Employee Pension Fund (GEPF) said Monday it remains in a sound financial position with a funding level of 119% and will continue to meet its financial obligations to its members and pensioners.
The GEPF said in a statement in response to reports that the Fund had experienced a decline of R200 billion as a result of the Israel-US-Iran conflict, that it is not unusual for market values to decline during major geopolitical events, like an outbreak of war, pandemics, or other global events, due to sudden market-wide asset devaluations driven by investor panic, rising inflation, and spiking energy costs.
“The GEPF has been here before, where its market value has been affected by market shocks, but it has subsequently always recovered all its losses, even surpassing its market value prior to the declines,” the GEPF said.
“This was the case during the great recession of 2008 as well as the COVID-19 pandemic in 2020. South African markets are therefore susceptible to global market shocks,” it said.
Over 80% of GEPF’s assets under management are invested in the South African economy, with the GEPF being the single largest institutional investor on the Johannesburg Stock Exchange.
“The GEPF applies a long-term investment approach ensuring that market shocks such as the Iran conflict have limited impact on the Fund’s ability to meet its long-term obligations to members and pensioners,” it said.
It said the decline in the market value of the GEPF has no impact on the GEPF’s ability to pay benefits. It also has no direct impact on the value of members’ pension benefits.
As a defined benefit (DB) fund, member benefits are guaranteed, and benefits are determined using a formula as defined in the rules applying member years of service, annual average salary, and an actuarial interest factor.
This means member benefits are not impacted by the performance of GEPF’s investments. “The Fund will always pay members their benefits as promised in the rules regardless of market performance,” the GEPF said.
Members' benefits were therefore not impacted by market value movements of the GEPF investment portfolio, including global shocks such as the current conflict in the Middle East, the GEPF said.
Visit:www.businessreport.co.za