SPF to be cautious in 2020 despite record-breaking performance last year | 03 April 2020
Even as the Seychelles Pension Fund (SPF) boasts of a record-breaking performance for financial year 2019, during which it registered its best ever surplus revenue of R138 million, chief executive Lekha Nair has noted that the SPF is taking cautionary steps in 2020 as COVID-19 threatens to destabilise the economy.
The SPF’s 2019 annual report shows that the national pension fund last year also registered its highest net investment income of R53 million as well as the highest amount collected in voluntary contribution (R28 million) since its inception.
Around R85 million was recorded as excess contributions for pensions and benefits paid which is an increase of 31% from R65 million in 2018. This is from total contributions of R423 million (increase of 21% from 2018’s R351 million), out of which R395 million was from mandatory pension contributions and R28 million from voluntary contributions.
Meanwhile SPF’s expenses in 2019 included payments of pensions and benefits amounting to R338 million to 5918 beneficiaries (increase of 18% from R286 million to 4929 beneficiaries in 2018); R136 million for expenditures relating to investments compared to R126 million in 2018; and administrative expenses of R48 million, a 9% increase compared to 2018.
Additionally the SPF incurred an unexpected expense of R9 million in 2019 due to the newly introduced voluntary contribution refund, payable to members who are 55 years old and over. Due to this, SPF’s total surplus fell to just around R129 million which is still a significant increase from 2018’s R114 million total surplus.
The SPF’s comprehensive 2019 annual report was handed over to the Minister for Finance, Trade, Investment and Economic Planning Maurice Loustau-Lalanne earlier this week on March 30.
In an interview yesterday, Mrs Nair highlighted that SPF had a very good year in 2019 due to the hard work and commitment of the SPF staff.
“We have had the largest revenue collected but we’ve also had the largest expenditure because we have paid out a lot of pensions as well. Today, we have around eight workers to every pensioner and five years ago we had ten workers per pensioner.”
Mrs Nair acknowledged that SPF’s great performance in 2019 will most likely not be repeated in 2020 due to the economic impacts and financial fallback linked to COVID-19.
According to Mrs Nair, SPF is presently “navigating in uncertainty” and hence has to strategise on the move.
The SPF management has worked on a business continuity plan to ensure that staff and clients take all the necessary precautions, and some SPF employees are working from home.
The organisation is also making its services available online and through a hotline.
SPF is also undertaking impact analysis exercises and has already deduced a potential decrease in dividends from companies in which it holds shares.
Mrs Nair noted that SPF’s cash flow and its planned budget for 2020 will be impacted.
“The government is offering a delay of three months for the private sector so they will pay their employer contribution by September. Naturally, the contributions for April, May and June will be affected but we have come up with a plan. We had some treasury bonds and deposits which, fortunately, matured in March hence we are well-prepared in terms of liquidity for the coming six months.”
SPF is predicting a financial hit in its real estate revenue, particularly from its commercial buildings, since around 41% of its tenants are in the private sector.
“Many of them have touched base with us, asking what SPF can do for them in terms of rent. Our response is that we are taking note of the package that the government will provide to the private sector and then we will look into what we can do for the private sector. If there are measures that are to be taken on our part, this will definitely impact on our performance for 2020.”
SPF will also be waiving its surcharge fees throughout 2020 for those who make late pension contribution payments.
“Even when this pandemic ends, we will have to face changes in the economy, changes to business models and to financial performances. As much as we appreciate SPF’s good performance over the last year, we always have to look at ensuring that the pension fund is sustainable,” Mrs Nair stated.
Chief investment officer at SPF, Davis Laporte, said that the pension fund has been working towards balancing its investment portfolio over the last couple of years in order to ensure that SPF does not depend on only one main source of investment income.
This strategy is proving to be a sage decision given the current crisis.
SPF’s medium strategy target is to have 45% of its investment income in real estate, 25% in equities, 25% in fixed income and 5% in cash equivalent. At present the figures stand at 47% in real estate (compared to 50% in 2018), 27% in equities (compared to 19% in 2018), 23% in fixed income (compared to 28% in 2018) and 3% in cash equivalent which remains the same as 2018.
The positive progress towards achieving the medium strategy target can be explained by the acquisition of 22% shares in local telecom company, Cable & Wireless, for the sum of R330 million.
SPF has a remaining amount of R126 million to pay in 2020 for its shares in Cable & Wireless.
Its investment in Cable & Wireless is proving to be another good decision since, unlike some other areas in the private sector, telecom companies are still operating amid the COVID-19 pandemic.