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GEPF revises resignation benefit

Nov 29, 2022

GEPF revises resignation benefitOn 1 November, the Government Employees Pension Fund (GEPF) revised its actuarial factors. This will have an impact on the resignation benefit of members, in calculation of a divorce order, or for members who exit the fund with fewer than 10 years of pensionable service.

It is important to note that it will not impact the benefit paid to members who retire with more than 10 years of service.

The GEPF is a defined benefit fund, which means members are paid a guaranteed income in retirement based on their final salary and years of service. The actuarial calculation of the fund is always based on its ability to meet this obligation (or liability) in the future.

This guarantee, however, does not apply to individuals who exit the fund prior to retirement. The value of an individual’s benefit prior to retirement is based on various factors including expected increases to salaries and pensions, as well as the level of returns that the fund’s investments are expected to earn in the long term. These drivers are referred to as “economic assumptions”.

The economic assumptions are based on market conditions as at the valuation date. The gap between the returns that the fund’s investments are expected to earn in the long term (discount rate) and the salary/pension increase assumptions has the biggest impact on the factors. The higher this gap, the lower the actuarial factors will be.

Under GEP Law, the actuarial valuation of the fund must be calculated every three years. Based on the valuation undertaken in 2021, the revised factors have resulted in actuarial interest values that are 14% lower on average than 2018.

The actuarial valuation of a defined benefit fund considers future liabilities and what the current value of those future liabilities would be.

As the retirement benefit guarantees an income based on final salary, to forecast the final salary expectation, the actuarial calculation needs to consider what salary increases the member would receive.

The fund then considers future market returns. The extent to which future market returns exceed the salary increases, would be an important factor.

Since the 2018 valuation, the salaries that were expected to be earned in 2021 are lower than what was assumed, and the expected future market returns have increased.

What is the effect on one’s resignation benefit?

Let’s use a simple example to illustrate the principle.

If in 2018 the fund calculated that it had to pay out R1 000 in five years’ time, it would calculate how much money it must have today in order to meet that liability. If it expected to receive a return of 8% per annum, then it would calculate that it would require R671 in current value to meet the R1 000 future liability.

In 2021, the factors changed. Due to lower salary increases, the fund liability is now R900 in five years’ time. The market returns are expected to be higher at 10% per annum. The fund now only needs to have R547 in current value to meet the R900 liability.

That means the fund’s provision per member is lower. If the fund required R671 in 2018 to meet its guarantee to a member, it now only requires R547. Therefore, if a member resigns today, their resignation benefits would be calculated based on the current provision of R547.

The extent to which individual members’ actuarial interest factors will differ between 2018 and 2021 depends on both age and category (whether they are Service members or not).

If the GEPF continued to use the assumptions from 2018, it overvalues the current resignation benefit and would result in exiting members being paid more than their fair share of the fund’s assets, thereby disadvantaging members who remain in the fund ‒ and ultimately those that retire with the fund.

These changes will only impact members who intend resigning, as their resignation benefit may be lower. However, it has no impact on members who retire with the GEPF. It is not in a member’s interest to resign to access their pension fund as their retirement benefits are guaranteed.

Change to valuation of withdrawal benefit

Prior to April 2012, as a defined benefit fund, when a member took cash upon resignation or was paid out due to disability or death, the GEPF used a formula based on a fixed rate of 7.5% growth per annum, years of service, and the salary as set out in the rules.

Considering that the fund’s market-related returns had in most years exceeded 12% per annum, members were being disadvantaged by the lower fixed rate used for the calculation. Members of a defined contribution fund would have seen their retirement benefits reflect the actual fund returns, so this put GEPF members at a disadvantage if they did not hold the funds to retirement.

From April 2012 a new calculation was used which took into consideration the underlying share of the member in the total value of the fund. This applies “floating factors” which take into consideration certain variables or assumptions within the fund, such as the expected returns and inflation in the long term (economic factors), and the rate at which members exit the fund ‒ whether through death, disability or retirement (demographic factors).

This article first appeared in City Press.


  1. it is so painful that we have to suffer because of corrupt people GEPF must not chop and change the rules whenever they feel like we are animals we deserve respect as these moneys belong to us. is it not optional for us to resign or retire and it was set rule from GEPF so pls lets not suffer now. that decision is unacceptable, oppressive

    • Gepf cannot recalculate the resignation benefits retrospectively it can only be fair to start a new calculation from the effective date of the decision

      • It doesn’t work like that. It is about the market valuation and other factors at the time

  2. How much would I get if I resigned


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Maya Fisher-French author of Money Questions Answered

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