Pension Fund Adjudicator expects surge in complaints over two-pot system

The pension fund adjudicator said her office received 9 177 new complaints in the last financial year.

The pension fund adjudicator said her office received 9 177 new complaints in the last financial year.

Published Oct 2, 2024

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The Office of the Pension Fund Adjudicator (OPFA) is anticipating an influx of complaints as employees seek to withdraw from the savings component of the two-pot retirement system.

In a report tabled to Parliament, pension fund adjudicator Muvhango Lukhaimane said her office received 9 177 new complaints in the last financial year.

“The majority of complaints received, constituting an aggregate of 84%, relate to withdrawal benefits and non-compliance with section 13A of the act on non-payment of contributions by employers.

“This is concerning as it not only affects the member’s retirement savings but other risk benefits that are dependent on settlement of premiums by funds to third parties such as death benefits, disability benefits and funeral benefits, leaving members further vulnerable at times of great need,” she said.

Finance Minister Enoch Godongwana said the repeated complaints of withdrawal benefits and non-payment of contributions by employers remained a great concern.

Godongwana urged stakeholders to remediate the undesirable result of poor fund governance, management and administration.

“This, in effect, undermines government’s efforts to improve trust, coverage and adequacy through preservation and sustainability of the retirement funds system,” he said.

The OPFA noted it expects an increase in complaints in the implementation of the two-pot retirement system.

Senior legal adviser Nondumiso Ntshangase said the successful implementation of the two-pot system will require collaboration and a concerted effort from all stakeholders to strengthen trust in the retirement system.

“The OPFA anticipates an unheralded volume of complaints as members seek to withdraw from the savings component, highlighting the need for funds to ensure readiness and provide clear communication to members.

“It is also imperative that funds register their two-pot rule amendments with the FSCA within the prescribed timelines, to avoid prejudice to members,” she said.

The OPFA also flagged the Private Security Sector Provident Fund (PSSPF) as the largest contributor to new complaints filed during the 2023-24 financial year.

OPFA noted a worrying trend where security guards are ostensibly subject to compulsory membership of the PSSPF, yet employers frequently disregard their obligations to remit required contributions

“This problem has evolved into an ‘acceptable business practice’ for the private security industry notwithstanding the existence of a collective bargaining agreement, an independent regulator in the private security sector, and criminal consequences for defaulters in terms of the Pension Funds Act,” PFA said.

In its report, the PFA stated that a new trend has emerged after the rules of the PSSPF were amended to reduce the contribution rate from 7.5% to 5% effective from September 2021 to February 2024.

PFA said “unscrupulous” employers continued to deduct contributions at the higher percentage from members’ wages and pay over the lower percentage to PSSPF.

“This points to a failure by PSSPF and its administrator to compare deductions to schedules and the regulated industry salary scales.”

Commercial umbrella funds have shown little initiative to enforce compliance against defaulting employers.

“They simply terminate the participation of the employer within the fund, in most instances without notifying members. This results in a situation where the employer continues to deduct contributions from unsuspecting members well after the participation date.”

Cape Times