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CENTRAL AFRICAN FEDERATION PENSIONS

Background

The Federation of Rhodesia and Nyasaland (to give its formal title) was created by the British Government in 1953, covering the self-governing colony of Southern Rhodesia and the British protectorates of Northern Rhodesia and Nyasaland.  The Federal Government was given responsibility to recruit and appoint its own civil servants.  Some were drawn from the three existing territorial governments, in many cases being transferred with their work to serve the Federal Government.  Others were recruited direct.  The Federal Government established its own pension scheme for its officials.  The Federation was dissolved by the British Government on 31 December 1963.  The Central African Pension Fund became administered by trustees, and was supposedly “guaranteed” by the three African governments and the British Government.

No pension increases

The British Government agreed in 2010 to clear the whole deficit in the Central African Pension Fund, by paying the outstanding shares of the three African governments which had declined to pay, as well as its own share. This was intended to ensure that pension payments at their present level would continue to be made to all the remaining pensioners for life.  But there is no provision for pension increases (i.e. for those pensioners who were not HMOCS members who were transferred with their work to Federal service).

That decision by the Secretary of State for International Development, Mr Andrew Mitchell, MP, followed requests by the Crown Agents, as the Trustee of the Fund, and by OSPA as representing the pensioners.  The OSPA Chairman’s letter to the Minister about the deficit included a statement that we believed that it was not acceptable that there had been no pension increase for some pensioners since 1997, while UK inflation since then had exceeded 35%.  But the difficulty has been that the original agreement setting up the Pension Fund made no provision for pension increases, leaving it to the Trustee to manage the funds in whatever way they would judge to be in the best interests of the pensioners. The Trustee could only recommend to the three African governments that they should provide for increases. It has been possible sometimes in the past to pay discretionary increases, but that always depended on actuarial valuations and estimates of mortality.  The triennial Actuarial Valuation Report as at 31 July 2009 said that there was no established practice of granting increases, and no allowance had been made for them in future. The subsequent Actuarial Valuation Report on the Scheme was as at 31 July 2012. The Report as at 31 July 2015 ought to have been produced in 2016, but has been delayed until 2017.  OSPA will wish to submit comments on it.

OSPA acknowledged that the Government’s decision in 2010 to pay the £3.3 million to clear the deficit and assure future pension payments was a generous one.  Although it had been hoped that account could have been taken of the need for pension increases, OSPA recognised that there were constraints.  

FRESH CONCERNS ABOUT THE PENSION FUND

The Crown Agents did not provide to OSPA a copy of the triennial Actuarial Valuation Report as at 31 July 2012.  The subsequent Actuarial Valuation Report as at 31 July 2015 ought to have been made available in 2016, but its preparation has been delayed within the Crown Agents system.  OSPA has asked to receive a copy when it is ready.

The Trustee’s Annual Report for the year ended 31 July 2014 was released to OSPA in January 2016. The number of pensioners was 1,358.  Total pension payments (i.e. excluding administrative and other expenses) were £571,971.  OSPA was concerned about two issues revealed in the Report, the low net rate of return on the investments in 2013/14, and the proportionate high cost of the pension payment administration.  In April 2016 OSPA asked the Crown Agents, as the Trustee, for their comments on these two points.  The Crown Agents replied saying that they would respond later in the year, but they did not do so.

In November 2016 OSPA reported its concerns to the Pensions Regulator, and a response is awaited.

December 2016