S.Africa: HORROR: People have no pensions! – 3,000 Companies have not paid into their Employees pensions!

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The two-pot system has revealed thousands of employers who have failed to contribute to their workers’ pension funds, leaving employees without retirement savings or benefits.

Over 3,000 companies were exposed when workers, allowed to access part of their pension, discovered that no funds were available.

Some of these employers have not have contributed to their workers pension funds for as long as 20 years.

“When you have almost everyone claiming at the same time it starts to expose those deficiencies in the system,” SABC Economics editor, Tsepho Mongwai, said.

He explained that around R21 billion in withdrawals have been made currently, and that figure will likely go even higher, with SARS set to generate an estimated R5 billion.

Since the two-pot system launched in September, he said that many issues that regulators were not previously aware of had been unearthed.

In particular, this includes the issue of non-payment of pension funds.

“The reality is you have companies, including to a large extent municipalities, that often experience cash flow challenges,” Mongwai said.

As a result, many of them haven’t been able to make the pension fund contributions they are required to.

However, according to Pension Funds Adjudicator Muvhango Lukhaimane, who spoke on Newzroom Afrika, companies haven’t taken the necessary steps to prevent this problem.

She said that while certain businesses struggle financially, many pension fund rules provide employers with relief if they find themselves in financial difficulties.

However, many simply do not bother to initiate the process and ask for the relief.

Problems with oversight and monitoring have also contributed to this problem.

For example, Mongwai explained that trustees struggle to ensure that all the companies under their watch comply with pension regulations since they have so many businesses to oversee.

Lukhaimane explained that the lack of monitoring from the side of pension funds is especially concerning.

“The funds are not doing their enforcement work the way that they’re supposed to do it,” she said. “So, if the employers see that the fund in its enforcement measures is lax, then they are also going to take a chance.”

“It is the fund’s duty to make sure that employers comply with the payment of contributions. Once employers don’t pay then the fund has got to institute certain steps in order to recover those contributions on behalf of members.”

Legal progress has been made to help address this issue. Non-payment of pension contributions is now considered a criminal offense, and those responsible may face jail time. However, governance issues persist.

While pension funds can act, many funds remain non-compliant. This is especially because there is a serious lack of accountability.

“Up to now, no board member of a fund has been held accountable, even in their personal capacity, for not following up on these things,” Lukhaimane said. “That is why funds just leave it like that.”

She added that larger insurance companies often avoid enforcement by terminating an employer’s participation in the fund after 90 days of non-payment.

“So, members never really get to know that it was because their employer was not paying that the fund was terminated.”

“So in a way, your big insurers get away with not enforcing the payment of contribution funds because they simply just close that portion of the fund and they liquidate it”

Lukhaimane explained that employees who realise that some of their pension funds are missing are supposed to complain to their employers first to give them a chance to resolve the issue.

However, where the person is still working for that employer, they are in a very vulnerable position.

Once they start asking questions about why their contributions haven’t been paid, “they can even be dismissed in certain instances.”

For that reason, members may have more success if they complain to their pension fund and, if the matter isn’t resolved, take the matter up with the Pension Funds Adjudicator.

However, Lukhaimane warned that pension funds prescribe after a period of time, which means that members only have a certain amount of time to claim.

In most cases, Lukhaimane said, the Adjudicator is only able to recover three years’ worth of contributions for these members.

“Check your balance check with your fund. Your first alarm bell will be if you don’t receive your annual benefit statement – start asking questions.”

The Financial Sector Conduct Authority’s (FSCA) response to this issue has been to “name and shame” non-paying employers.

This approach dates back to before the opening of the two-pot system.

In September 2023, a year before the two-pot system opened, the FSCA announced the publication of names of employers with arrear contributions.

This communication provided the names of 3,262 employers that contravened section 13A of the Pension Funds Act, which prescribes the manner in which contributions and other benefits should be paid to a retirement fund.

“The FSCA received a total of 5,430 employers that contravened section 13A of the PFA as of 30 April 2023,” the authority said.

“28% of the employers had contributions outstanding for one month, 24% for 2 to 12 months, 23% for 13 to 60 months and 25% for five or more years.”

“The publication at this stage reflects only those employers who have outstanding contributions for a period of four and more months.”

The FSCA has continued to update the list; however, members are also encouraged to check their pension contributions themselves.

The truth is that while the new system aims to preserve people’s retirement savings, if employers do not pay their contributions – there is nothing to preserve, Mongwai said.

As a result, these people will become dependent on the state.

Source: https://businesstech.co.za/news/lifestyle/795945/20-years-of-pension-savings-down-the-drain-2/

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