Two-pot retirement system: Nothing for thousands of pension fund members

Thousands of workers will not be able to withdraw money from their saving pots under the two-pot retirement system because their employers did not pay over their contributions to their pension funds.

This includes the workers from 166 municipalities, including Randfontein, Musina, Makhado, Madibeng, Mogale City, George, Mossel Bay, Emalahleni, Rustenburg and the West Rand District Municipality, according to a list of employers who are in arrears with pension fund payments for more than four months, according to the Financial Sector Conduct Authority (FSCA) earlier this year.

The list contains the names of about 4,000 employers who had outstanding contributions by 31 July last year. It also includes 2 345 employers who are in arrears with the Private Security Sector Provident Fund, 78 employers in arrears with the Engineering Industries Pension Fund, 285 for Metal Industries Provident Fund and 502 for the Transport Sector Retirement Fund.

This means that thousands of truck drivers, private security staff, truck drivers and factory workers will not be able to make use of the two-pot retirement system as there will be no funds available in their saving pots.

ALSO READ: FSCA names 3 262 employers with retirement fund contributions in arrears

Illegal for employers to not pay over retirement contributions

These employers are, according to the FSCA’s letter Communication 10 of 2024 to retirement funds, “in direct contravention of section 13A(3)(a) of the Pension Funds Act”.

This section requires employers of pension fund members to pay over any contribution that must be deducted in terms of the rules of the pension fund as well as any contribution the employer is liable for in terms of the rules of the pension fund.

These contributions must be paid directly into the relevant account or the bank account of the fund within seven days after the end of the month that the contribution is for.  Anyone who contravenes this section or fails to comply with section 13A is guilty of an offence and liable on conviction to a fine not exceeding R10 million or imprisonment for a period not exceeding 10 years or both.

The boards of pension funds who find that employers are not paying over their workers’ contributions are required to approach the South African Police Service to lay a charge against the employer, according to the FSCA.

To resolve the issue of arrear contributions in the pension fund industry, the FSCA published the “Conduct Standard 1 of 2022: Requirements related to the payment of pension fund contributions” which came into effect in February last year.

The Conduct Standard places notification and reporting obligations on the board of a fund, principal officer or other authorised person, where employers fail to pay over pension fund contributions.

ALSO READ: Two-pot retirement system: Will administrators laugh all the way to the bank?

Pension Funds Adjudicator received complaints about employers not paying

Naheem Essop, Deputy Pension Funds Adjudicator, says since 1 January 2024 the office received 1,996 complaints about arrear contributions by employers. Another 1,768 complaints were classified as withdrawal benefit types of complaints, which typically contain issues relating to arrear contributions.

Essop says as pension fund members must first lodge complaints with their funds for internal dispute resolution within 30 days before lodging a formal complaint with the Adjudicator, the office has not yet received any formal complaints about the two-pot retirement system. “We expect formal complaints to start coming in from October 2024.”

ALSO READ: Two-pot retirement system: funds are ready, members are not

This is what pension fund members enquired about

The Adjudicator added a dedicated line to handle enquiries about the two-pot retirement system and by noon on Monday received 102 enquiries about the two-pot retirement system. These enquiries were about:

• the process for claiming withdrawals from the savings pot
• how much is available to withdraw
• the turnaround time for a withdrawal benefit to be paid
• whether a member must resign to get paid their retirement benefits and
• frustration when members were unable to access fund platforms.

Essop says pension fund members can direct complaints about employers not paying over their deductions and contributions to the Office of the Pension Funds Adjudicator. “The process is free, relatively simple and fast.

ALSO READ: Two-pot retirement system: Do you know enough?

Where to find the list of errant employers

Pension fund members can find the list of employers who did not pay over pension fund contributions to pension funds here where they must then click on “Retirement funds and employers with arrear contributions”.