De Beers pensioners believe they are being unfairly penalized as the diamond group battles to cope with grim financial and market conditions, writes miningmx.com.
Last week it was disclosed that De Beers has put its main diamond producing mines in Botswana on care and maintenance until further notice, while the group is also laying off employees and contractors at its Snap Lake diamond mine in Canada.
The three shareholders which control De Beers – Anglo American, the Oppenheimer family and the Botswana government – have agreed to provide $500 million in interest-free loans to the company.
That is in addition to about $300 million in loans provided by shareholders in 2008.
The pensioners’ gripe is that the De Beers Pension Fund declared a surplus of R1.18 billion which it paid out in 2008, allocating R591.5 million to pension fund members and handing R591.5 million back to the De Beers diamond group, said the miningmx report.
While this treatment of the surplus is legal, a number of diamond pensioners are up in arms because they were subsequently informed that they would not receive any increment in their pensions during 2009 to compensate for inflation, it said.
According to miningmx, there are about 10,500 De Beers diamond group pensioners, among them a substantial number of senior executives who have left the group in recent years as it sharply downsized its head office staff.
A group of these pensioners have banded together and are now in discussions with pension fund trustees.
A former senior De Beers executive told miningmx: “Legally, the trustees have not done anything wrong but, morally and ethically, we believe it was wrong to take that money out of the pension fund given the current economic situation.
“Most of the pensioners would have preferred the money to have remained in the pension fund so as to be able to tide the members over the next few years.”
Another De Beers pensioner said; “The De Beers pension fund was very well funded and used to come up with annual increments in pensions that were related to inflation.
“We are highly upset about the way this was handled and intend to take the trustees to task over it. We are trying to get an amicable solution but, if needs be, this could end up in court.
“I believe it was immoral to allow the De Beers diamond group to walk away with that amount of money and leave pensioners without an increment in their pensions under current economic circumstances.”
De Beers Pension Fund principal officer Leon Coetzee said: “We have spoken to a group of pensioners who are concerned about the matter and discussions are ongoing.
“We have undertaken to review the situation as soon as the diamond markets improve. At the end of the day the decision to pay out the surplus was taken by the trustees.”
According to a statement from the De Beers Pension fund actuary, “the surplus apportioned was only that money left after setting aside reserves and contingency reserves on the most conservative basis allowed by the Pension Fund Act.
“The poor investment returns of 2008 had the effect of reducing the contingency reserves backing the pensioner assets, but as at December 31 2008 the fund still held contingency reserves which were 6% to 8% in excess of the liabilities, which too were assessed on a conservative basis.
“The fund’s actuary has confirmed that the diamond worker pensioner portfolio is in a sound financial position as at December 31 2008, although obviously the position is weaker than at March 1 2007.
“The trustees, acting on the advice of the actuary, decided to adopt a conservative approach and not grant a pension increase as at January 1 2009. In making this decision it should be borne in mind that most pensioners had received an increase of 6.5% on November 1 2008 as part of the fund’s surplus apportionment scheme.
“The trustees took the view that if the financial markets were to enter a period similar to that of the Great Depression, the fund would need as much contingency reserves as possible as a buffer.
“On the other hand, if markets improved significantly, the trustees would grant pensioners an increase at that time (i.e. they would not wait until January 1 2010, the normal next increase date, before granting this increase).”