Thousands of Transnet pensioners have been caught unawares by the government-owned transport corporation's sudden decision to make them pay contributions to their medical aid cover.
The decision has sent shock waves through the retirement market against a background of employers in both the private and public sector seeking to cut costs as medical inflation soars.
Transnet pensioners were under the impression that they were assured of a non-contributory medical scheme in their retirement years.
Adrian Gore, chief executive of Momentum Health, told Personal Finance that he did not believe that moves to increase medical aid contributions or to introduce medical aid contributions for existing pensioners would be enforceable.
He said he believed pensioners had vested rights whether they were contractual or implied. On this basis Transnet's decision or similar decisions taken by other employers could be challenged.
However, the position for future pensioners could be radically different. Future pensioners could find themselves paying more, both before and after retirement.
Both Dr Altus van der Merwe, head of Sanlam subsidiary, Sanmed, and Gore warned that the financing of health care for pensioners was becoming critical.
There were three reasons for this:
* Soaring medical care costs;
* A substantial increase in the number of pensioners as a percentage of membership of schemes. About 20 years ago the average percentage of pensioners of a medical scheme was three or four percent. In many schemes this percentage has risen to 25 percent. Van der Merwe said this exacerbated the problem of costs because medical claims normally soared after the age of 60; and
* The move to force companies to declare the actuarial shortfall of medical schemes on the balance sheet. Most medical aid schemes are run on a "pay-as-you-go" basis with current contributions funding current costs. Very few schemes take into account future liabilities.
The increasing number of pensioner members as well as the development of schemes which reduce younger members' subsidisation of older members are rapidly increasing future liabilities for employers.
Gore and Van der Merwe said companies were being forced to take action to reduce the liabilities and costs.
Gore said existing employees must, in their retirement planning, start taking into account the fact that medical costs are likely to be far higher as a result of employers reducing the obligations to employees.
Van der Merwe said that employers will have to look at other options for cutting costs. These options include the introduction of managed health care as well as pre-funding of future pensioner medical costs.