Pension Fund Benefits: Actuarial Factors Review 2022

Pension Fund Benefits: Actuarial Factors Review 2022

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Dear In-Service and Deferred Members,

The Eskom Pension and Provident Fund (EPPF) has valuable information to share with you. 

What is required from you?

Please read the following document carefully. At the end, you will find the details of information-sharing sessions to help you with questions you may have. We have also included our various communication channels should you wish to reach out to us. 

As you may know, the EPPF is a defined benefit fund. This means the EPPF is able to specify how much retirement income employees will get once they retire. Defined benefits rely on actuarial factors in the calculation of the benefit. In your case, the EPPF’s Actuary provides actuarial factors to the Fund, and these are loaded onto the administration system and used whenever a benefit is calculated for a member. 


Why is this communication important for you as an in-service or deferred member?
The EPPF wants to give you information now that the review of the actuarial factors has been completed as the changes affect the calculation of benefits after September 2022. This means the new benefit calculations will apply from 1 October 2022.


What are actuarial factors?
Actuarial factors are based on a set of financial and demographic assumptions, called an actuarial basis, recommended by the Fund’s Actuary. This actuarial basis comes from the actuarial valuation of the Fund. In the normal course of events, the actuarial factors are reviewed every three years. The last such review was following the 30 June 2018 valuation. Since the 30 June 2021 actuarial valuation has been completed, it is time to review the actuarial factors once again and this exercise has recently been completed. 


What is being changed and why?
The only change has been to adjust the factors to reflect the long-term changes in the financial and economic conditions. The value of each type of factor depends on what assumptions we make about long-term future investment returns and pensioner life expectancy. 


What does ‘assumptions’ mean in this context?

By ‘assumptions’ we mean reasonable expectations about future events based on actual experience and statistics. The assumptions must reflect the experience of the EPPF membership and its investments, so that the factors result in fair value for money for members, and the EPPF remains financially sound and sustainable. After a comprehensive review, the financial assumptions are being changed to reflect our expectation of slightly higher investment returns in the future compared to the past.


What are the factors that are changing and what do they mean?

  1. Commutation factors
    Commutation factors are used to convert the required portion of a pension to a lump sum benefit on retirement of a member. The EPPF factors are single-life annuities which allow for long-term future pension increases which are in line with inflation. They are also gender-specific, which means that the factors allow for the statistically significant difference in life expectancies of women and men.
  2. Money purchase conversion factors
    The money purchase conversion factors are used to convert the money purchase balance at the date of calculation to an immediate monthly pension for life from the Fund, to calculate the cost of waiving the early retirement reduction factor for a member, or to calculate the cost of generating additional service to a retiring member. The EPPF factors are gender-specific and are either single-life annuities, in the case of members who are unmarried, or joint-life annuities, in the case of members who have a spouse at the date of calculation. For the latter, these factors take into account the exact age difference between the member and their spouse.


Important note:  The Fund also has a table of same-sex joint-life money purchase conversion factors for members who are in same-sex partnerships. If you and your spouse are in a same sex partnership it is important that you notify the Fund so that any future benefit which involves the conversion of your money purchase balance into a pension takes account of the correct gender of your partner. (At the end of this document, we have listed the many ways you can contact the Fund in order to update your information).

  1. Actuarial Reserve Value (ARV) factors
    The ARV factors are used to calculate the equivalent capital value of the accrued pension benefit for the purpose of preservation of the capital value in the deferred pension (money purchase) scheme for an ‘exiting’ member until retirement age. These are complex factors which consider all modes of exit from the Fund. The EPPF factors are not gender-specific and are derived from the results of the latest actuarial valuation.
  2. Minimum Individual Reserve (MIR) annuities
    The MIR is the fair value equivalent of the present value of the member’s accrued deferred pension. This benefit is payable as cash, or as a transfer value to another approved fund, when a member resigns, is dismissed, or is retrenched. The benefit is based on the pension formula as set out in the Rules of the Fund, the MIR annuity factor which capitalises the accrued annual pension into a lump sum and a discounting factor, based on 40% of the Earnings Yield of the JSE All Share Index. The EPPF MIR annuities are gender specific.


What do these changes mean for in-service or deferred members?
All the factors have decreased in value due to the increase in the long term expected investment return assumption. For each factor above, the effect is as follows:

  • Commutation factors:  each Rand of pension will now be worth less than it was before, so when commuting your pension, you will get less cash
  • Money purchase conversion factors:  when using your money purchase balance to buy a pension it will cost you less, i.e., you will get a higher pension; this makes sense because a higher expected future investment return means that less money must be invested now to provide the same annual pension income as before
  • ARV factors: the lower ARV factors translate into lower ARVs being calculated at the date of deferment
  • MIR annuities: the lower MIR annuities translate into lower MIRs being calculated at the date of deferment


Do you have examples to help in-service or deferred members understand this information better?
This Appendix will help you understand better as it illustrates clear examples.

Appendix 1 provides examples of the effect on a member retiring, to help you understand the changes. The examples are not exhaustive and may not show the expected effect in your own unique personal circumstances. 


Do you have more technical information?
In-service or deferred members who are interested in some more technical information can look at Appendix 2 on this link. In this appendix, the EPPF money purchase pension is compared with a similar pension that an individual investor could obtain from two selected major insurance companies, using an initial investment of R1,000,000. The EPPF pension is higher in all cases, because, among other things, the EPPF cost structure is lower than that of an annuity policy with an insurance company.


Are there information-sharing sessions to help me understand better, and where I can ask specific questions?
The EPPF’s Client Liaison team has planned various online information-sharing sessions to help you. 

For In-Service Members:

29 SeptemberMember Session09:00 – 11:00Click here to join the meeting
4 OctoberMember Session09:00 – 11:00Click here to join the meeting
6 OctoberMember Session09:00 – 11:00Click here to join the meeting
10 OctoberMember Session09:00 – 11:00Click here to join the meeting

For Deferred Members:

30 SeptemberMember Session09:00 – 10:30Click here to join the meeting


How you can get in touch with the EPPF team:
- WhatsApp 072 741 7774
- Web chat on
- If you don’t have a smartphone, type: USSD *120*1037# (and then press ‘send’)
- E-mail us on
- Call our call centre tollfree on 0800 11 45 48
- Click here for Walk-in Centre info for the EPPF Head Office and satellite offices


The EPPF team

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