UNIVERSITY OF THE FREE STATE
PENSION FUND AND DISABILITY
REPORT OF THE MANAGEMENT BOARD TO MEMBERS
FOR THE FINANCIAL YEAR 1 JANUARY 2005 TO 31 DECEMBER 2005
REPORT OF THE PENSION FUND OF THE UFS
The Management Board of the Pension Fund has pleasure in presenting their report to
members for the year ended 31 December 2005. The report is intended to provide members
with a brief overview of the management, activities and financial results of the Fund and to
inform members of recent developments in the retirement funds industry.
STATUS OF THE FUND
The Fund is both a defined benefit and a defined contribution fund. It provides benefits when
members retire, but also if they resign or die before retirement. The Disability Reserve Fund
provides income replacement in the case of disablement.
The Pension Fund of the UFS is registered in terms of the Pension Funds Act (registration
number 12/8/31370) and approved in terms of the Income Tax Act.
The participating employers in the Fund are the UFS (Principal Employer) and FARMOVS
The Fund is managed by a Management Board consisting of employer and employee
representatives in accordance with the requirements of the Pension Funds Act. The
Management Board meets regularly to discuss investments, benefits and administrative
matters pertaining to the Fund.
The following persons were appointed and elected as Management Board members as from
1 December 2004:-
Employer representatives Employee representatives
Prof JV du Plessis (Chairman) Mr A van der Bijl
Prof FP Retief Prof T Verschoor
Prof DA Viljoen Mr PJG Coetzer
Mr CR Liebenberg
Pensioner representative Pensioner secundus
Prof LC Buys Prof EG Boonstra
Employer secundi Employee secundi
Prof MJ Crous Mrs EJ Raubenheimer
Prof DJ de Waal Prof PPC Nel
Mrs WF Hoexter Prof HJ van der Linde
Mr J Swanepoel
These members’ term expires at the end of November 2009.
The following persons and bodies assist the Management Board in managing the fund:
Principal Officer: Mr A van der Bijl (Phone 051-4013634)
Actuary: Mr C Heymans (ABSA Consultants and Actuaries (Pty) Limited)
Auditors: PriceWaterhouseCoopers Inc.
secretary: ABSA Consultants and Actuaries (Pty) Limited
PO Box 12839
Bankers: ABSA Bank and Nedbank
Assurance: Momentum Life
INVESTMENT OF FUND ASSETS
With regard to the pensioners the Management Board aims to achieve investment returns of
6,5 % per annum plus not less than 75 % of the inflation rate. With regard to active members
the aim is to achieve 3 % per annum above the salary inflation rate while maintaining
acceptable risk levels. In determining the investment strategy and selecting an investment
manager careful consideration is given to the requirements of the Fund and the credentials of
Mr Antony Lester of the firm Fifth Quadrant has been appointed as investment adviser. A
new investment strategy has been developed on his advice. Assets are allocated to
specialist asset managers. The equity portfolio for instance, has been allocated to asset
managers who have proved to be most successful in the management of equities while
bonds are managed by specialist bond managers. The management board also decided on
a division between the assets of pensioners that differs from that of active members and
which should lead to lower volatility in the returns on those assets and a higher probability of
reaching the investment aims.
The fund’s assets are currently managed by:
- Allan Gray Investment Management
- Coronation Asset Managers
- Investec Asset Management
- RMB Asset Management
The total market value of the Fund’s assets increased from R 760 million on 31 December
2004 to R 987 million on 31 December 2005. The large increase in the value of assets was
largely due to the increase in the market value of investments. Members should not expect
similar increases in every year.
RAB INVESTEC ALLAN GRAY CORONATION ABVEST
DISABILITY RESERVE FUND
OU MUTUAL SANLAM ABVEST
The total assets of the disablilty reserve increased from R15 million on 31 December 2004 to
R 18.8 million twelve months later.
Since inception of the fund pensions have been increased as indicated in the following table.
The change in the consumer price index for the preceding period is also supplied:-
PENSION INCREASES INFLATION
1 April 1995 6,5 % 9,9 %
1 April 1996 6,0 % 7,8 %
1 April 1997 3,0 % 8,1 %
1 April 1998 4,5 % 7,6 %
1 April 1999 1,5 % 7,6 %
1 April 2000 6,5 % 3,9 %
1 August 2000 3,0 % -
1 April 2001 4,5 % 6,5 %
1 April 2002 5,5 % 5,3 %
1 April 2003 4,5 % 10,4 %
1 August 2003 2,0 % -
1 April 2004 2,0 % 3,4 %
1 April 2005 4,5 % 2.0 %
1 April 2006 5,5 % 3,6 %
(Note: Inflation on 1 April 1995 is the average for the period 1 December 1994 to 31
Disability pensions have also been increased regularly and were increased by 1.6 % with
effect from 1 April 2005 and a further 2.5 % from 1 April 2006.
(Extracts from the audited financial statements for the year 31 December 2005)
Funds received Pension Fund Disability Reserve
2004 2005 2004 2005
R000 R000 R000 R000
Contributions by members 10 806 12 426 - -
Contributions by employer 24 352 *24 443 3 921 4 511
Reinsurance 2 267 1 295 2 581 2 449
Transfers received 3 275 10 349 - -
Investment income 144 083 221 199 879 1 912
Total 184 783 269 712 7 381 8 872
* Includes an additional contribution of R 4,4 million by the employer
Income as a percentage of total income
Disability Reserve Fund
Payments Pension Fund Disability Reserve
2004 2005 2004 2005
R000 R000 R000 R000
Pensions 22 025 24 270 2 162 2 081
Lump sums at retirement 6 274 9 301 - -
Lump sums at death 1 265 384 - -
Resignations 3 162 4 096 - -
Reinsurance 2 317 2 277 2 146 2 458
Administration 1 046 1 194 5 6
Contributions t Pension Fund - - 564 548
Tax / Levies 2 138 2 879
Total 38 227 44 401 4 877 5 093
Payments as a percentage of total payments
5% 6% Administration
Disability Reserve Fund
Active members 1019 74 % 1085 75 %
Pensioner’s 352 26 % 370 25 %
TOTAL 1371 100 % 1455 100 %
AVAILABILITY OF RULES
The registered rules and audited financial statements of the Fund are available for scrutiny
during office hours at the office of the Principal Officer, Room 306, George du Toit building.
Copies of such documents are available from the Fund upon payment of a fee of R10 plus
R2.00 per page.
THE MANAGEMENT BOARD
PENSION FUND OF THE UFS
PENSION FUND OF THE UFS
PERSONAL FINANCIAL PLANNING
Preserving your retirement money
Very few people nowadays stay with one employer for their entire working life. Every time
you resign from employment, you have the option of taking your benefit in your retirement
fund in cash or to preserve it for your retirement. Should you elect to take the money in cash,
you must keep in mind that you will only receive the greater of R1 800 or your transfer from
the AIPF free of tax. The balance will be taxed at your average tax rate. However, should
you elect to preserve the money no tax will be payable.
If you preserve your benefit, you may transfer the money free of tax to a retirement annuity
fund or a preservation fund of which your current employer is a member. Had you found new
employment you could also have transferred the money to the retirement fund of your new
employer if your new employer’s fund allows for transfers.
Upon your resignation you can ask the Human Resources Department for a list of the
preservation funds of which your employer is a member. Keep in mind, though, that you
must exercise the option to transfer to a preservation fund and ensure that your employer is a
member of the particular preservation fund before you resign.
After your money has been transferred to a preservation fund, you will be allowed to make
one withdrawal from such fund prior to your retirement. This is a once-off withdrawal and no
further withdrawal from the preservation fund will be allowed. The withdrawal from the
preservation fund will be taxable as described above.
On transferring your money to a retirement annuity fund no withdrawal benefit can be paid
out of the annuity fund. You are however entitled to your retirement benefit from age 55
If you consider that your retirement money will probably be the biggest investment you will
make in your lifetime, it makes sense to preserve rather than spend that money if you change
jobs so that you can provide for yourself and not be dependent on another person when you
As mentioned above, you will only receive the greater of R1 800 or your transfer from the
AIPF free of tax if you resign and elect to take your money in the Fund in cash. The balance
will be taxed at your average rate.
When you retire an amount calculated in terms of the Income Tax Act will be free of tax and
the balance will be taxed at your average rate of tax.
Payment of lump sum death benefits
The lump sum benefits payable by the Fund on your death will be paid to your dependants
and/or your nominees.
A dependant is your spouse, your child, a person for whose maintenance you were legally
liable or for whose maintenance you were not legally liable but whom you were actually
supporting or for whose maintenance you would have become legally liable had you not died.
A nominee is any person, other than a dependant, that you have nominated to receive your
lump sum death benefits.
The Pension Funds Act and the rules of the Fund provide for lump sum death benefits to be
* any one or more of your dependants; or
* any one or more of your dependants and nominees who are not dependants; or
* any one or more of your nominees if you leave no dependants; or
* your estate if you leave no dependants or have not nominated nominees to receive
your full benefits.
The management board must determine to whom and in what proportions lump sum death
benefits are to be paid, after careful consideration of each case. Lump sum death benefits
may also be paid into a trust for the benefit of a beneficiary if the management board deems
it appropriate or if a member has indicated the use of a trust on his/her nomination form.
It is very important that you complete a nomination form, which is to be kept at the Human
Resources Department. Every time your circumstances change, you should complete a new
nomination form, for instance if you get married, divorced or if a child is born. You are
requested to complete the attached nomination form and to return the completed form to the
Human Resources Department as soon as possible to bring your file up to date. To ensure
confidentiality you may place the nomination form in a sealed envelope with the Human
Resources Department. They will return it unopened to you on request or will keep it sealed
until your death. In the event of the death of a member the lack of information about the
member’s dependants causes delays in the payout of death benefits with the resulting
hardship to the dependants. It is therefore absolutely essential that members use the
nomination form (or a letter included with the nomination form) to inform the trustees of the
particulars of his/her dependants. The minimum information that should be supplied is the full
name and ID number, relationship with the member (example son, daughter, wife, husband,
stepchild, foster child) as well as the physical address where the dependant lives.
Payment of benefits: Partners living together
As result of determinations by the Pension Funds Adjudicator and recent court judgments,
the Management Board of the Fund took the following resolutions with regard to payment of
benefits to beneficiaries:
(i) People of the opposite sex living together
Current legislation allows two people of the opposite sex to marry. Two persons of
opposite sex living together do not constitute a permanent arrangement of mutual care
for each other and by not marrying apparently do not wish to be treated as married
persons. For this reason the member’s partner will not be entitled to a benefit as if he
or she is the husband or wife of the member.
(ii) People of the same sex living together
Current legislation does not allow people of the same sex to marry. For this reason
the Management Board decided under the following circumstances to acknowledge
the member’s partner as a dependant when a claim arises:
a) The relationship must be registered with the Management Board before a claim
arises. (Registration forms are available from the Principal Officer);
b) The relationship must be of a permanent nature and must be uninterrupted in
existence for more than twelve months;
c) The nature of the relationship must be an intimate relationship and not just be
based on a financial considerations.
The rules of the fund are being amended accordingly.
A will is an important feature in your retirement planning. It is important that you draw up a
valid will clearly expressing your wishes regarding the disposition of your assets on your
death. Your will should also be updated every time your circumstances change.
Although lump sum death benefits from the Fund do not form part of your estate and any
stipulation in your will regarding the disposition of these benefits will not bind the
Management Board it could nevertheless supply valuable information to the trustees that
could be taken into consideration when they have to consider the division of death benefits.
Deductions from benefits
No deductions may be made from your retirement benefits when falling due, except in certain
specific circumstances stipulated in the Pension Funds Act. These circumstances include the
following: a divorce order in which a portion of your benefits is allocated to your former
spouse; an outstanding housing loan for which the Fund acted as guarantor; or compensation
payable to your employer in respect of any damage caused to your employer by reason of
theft, dishonesty, fraud or misconduct by yourself.
Additional provision for retirement
Members are encouraged to make additional provision for their retirement. Retirement
annuity funds enjoy certain tax concessions and can therefore be utilized successfully for this
Should you have any complaint regarding the administration of the Fund, the investment of its
assets or the interpretation or application of the rules of the Fund, section 30 of the Pension
Funds Act stipulates that you must first lodge your complaint with your employer or with the
Fund. Your complaint must be replied to within thirty days. If you receive no reply or if you
are not satisfied with the reply that you do receive, you may lodge a complaint with the
Pension Funds Adjudicator.
Advocate Vuyani Ngalwana is the Pension Fund Adjudicator. You can reach his offices
telephonically at (021) 6740209 or via his web site, http://firstname.lastname@example.org.
The Adjudicator’s postal address is as follows: P.O. Box 23005
The Adjudicator will then make a ruling, which has the same legal status as judgement in a
civil court of law.
Should you not be satisfied with the determination of the Adjudicator, you may, within six
weeks apply to the division of the High Court which has jurisdiction for relief.
Persons to contact for advice
The Financial Advisory and Intermediary Services Act was promulgated during November
2002. According to the Act all financial service providers (FSP’s) had to be registered with
the Financial Services Board at 30 September 2004. In terms of the Act no FSP may provide
financial advice unless he/she is licensed to do so.
If you make use of the services of a financial broker or advisor for retirement planning you
should ask for proof that he or she is licensed to provide advice in this regard.
If you would like an appointment with the Fund’s administrator to discuss aspects about the
fund, please contact Mr Danie Janeke at 051-4010652.
As mentioned under deductions from benefits above, legislation allows retirement funds to
grant surety ship for housing loans.
The Management Board laid down the following guidelines and control measures to ensure
that the purpose of the provisions in the Pension Funds Act will be met: -
- Proof of right of occupation (or title deed)
- Handing in of plans or sketch plans
- Appointment of an inspector
- Payments only to the service provider and only after inspection
The Management Board decided to lay down the following limitations on the amount that can
be borrowed: -
- The monthly premiums may not exceed 25 % of the member’s gross monthly salary;
- The maximum loan amount will be limited to 50 % of the member’s accrued value in
the fund, subject to the above-mentioned re-payment limit.
Mr PJG Coetzer, telephone number 051-401 3035, room 210, George du Toit building, can
be contacted for more information.
The rules of the Fund were amended to allow members whose normal retirement age is 60
years to retire late but not later than 31 December of the year in which the member attains
the age of 65 years, on condition that the employer so requests.
Transfer of membership
During the year the Management Board provided the members of the Pension Fund and
Provident Fund with a once-off irreversible option to transfer their membership to category D
of the Pension Fund. Category D of the Pension Fund is a defined contribution fund and the
only category available for new entrants. The existing category C is like categories A and B a
Individual investment choices
As from 1 December 2005 members of option D can decide in which of a limited number of
portfolios their benefits should be invested. Sessions to communicate information in this
regard were held on all three campuses. In those instances where members did not indicate
in which portfolio their benefits should be invested the benefits were invested in a so-called
default portfolio. A member can make changes annually as from 1 September 2006.
Members of options A and B were not offered this opportunity because they belong to defined
benefit options and it therefore does not apply to them while members of option C were not
offered this opportunity because their benefits are guaranteed. Members of option C were
however offered the opportunity to transfer to option D and some in fact did so.
It is recommended that you consult your financial advisor to assist you with your choice.
With the inception of the Fund on 1 December 1994 the funding level was approximately
60 %. The Management Board, at that stage, made it their objective to have the Fund 100 %
funded by 1 January 2003. The last actuarial valuation of the Fund was done on 1 January
2003. The results of the valuation revealed that the funding level had improved to 99 %. That
the initial objective could be reached was largely due to the additional contributions made by
the employer. The Board expressed its gratitude to the University council. The
implementation of tax on retirement funds during 1998 prevented the objective from being
The implications of the Second Amendment Act to the Pension Funds Act which came into
effect on 7 December 2001 resulted into a further reduction in the funding level. Some of the
stipulations of the Act compel funds to make provision for the payment of certain minimum
benefits on termination of service. This places a new, additional liability on the Fund.
According to the actuary’s latest calculations the funding level on 1 January 2003, taking the
additional liability into account, amounted to 94,7 %. The results of the 1 January 2006
valuation are not yet available but will be made known shortly.
The employer monthly contributes an additional amount with the objective to have the Fund
100 % funded not later than 2012.
During the last budget speech the Minister of Finance announced that the tax on retirement
funds will be reduced from 18 % to 9 % as from 1 March 2006
THE MANAGEMENT BOARD
PENSION FUND OF THE UFS