Pension Fund Adjudicator flags employers defaulting on payments

The Pension Fund Adjudicator and the Financial Sector Conduct Authority are concerned by the failure of some companies to contribute towards pension funds.

That’s as eligible South Africans continue to access a portion of their pension funds since the inception of the Two-Pot Retirement System over a week ago.

Fund managers have described the new retirement system as a monumental historic moment for the retirement benefits industry in South Africa.

Many employees are left in the cold as the Two-Pot Retirement System momentum continues.

The Pension Funds Adjudicator Office revealed that some employers have not been contributing towards their employees’ pension funds. It says for some companies this goes as far back as 20 years ago. The Office says this is viewed as a criminal act and there needs to be accountability.

“That is a trend that we have been observing over the years and reporting on. If you look at the numbers will vacillate between 80% and 82% to the year end. March 2024 the number was 82% of matters finalised. We’re sitting, well dealt with in one way or another. An employer not having paid their contributions and that trend continues from April up to now. It’s exactly the same trend,” says Muvhango Lukhaimane, Pension Funds Adjudicator.

While some are left out in what fund managers describe as a historic moment for the retirement benefits industry in South Africa, many have already started cashing in from their savings pot.

Momentum Corporate says it received 60 000 claims from the 2nd of September and has made payment to about 33 000 of its members in just over a week. It expects to pay at least R20 million tax through this system from its umbrella fund.

“So, I think I can probably speak to that specifically for you know, the umbrella fund business where we’ve seen something in the order at this point in time, something in the order of R20 million, you know towards taxes,” says Dumo Mbethe, Momentum Corporate CEO.

At the same time, the Financial Sector Conduct Authority urges employers to communicate their shortcomings with their employees.

“Members have to be very aware that they will only have access to the funds that are in the pot that are actually in the pot. So, to the extent that their employer has not been contributing to their retirement fund as they should have been so therefore the size of the pot is actually smaller that means they will be limited to what has been paid into the pot,” says Katherine Gibson, Deputy Commissioner: FSCA.

SARS is expected to cash in on the Two Pot Retirement System.

AlexForbes says it expects at least R270 million will go towards tax.

“The value of claims is sitting at currently at R2.3 billion, which is quite significant. We were originally expecting in the industry between R50 billion and R100 billion to be withdrawn. Down in this first round, but we based on what we’ve seen so far, we think it’s probably going to be at the upper end of that estimate that the R100 billion but it’s still too early to tell, but extremely high level of activity in a very short space of time,” says John Anderson, AlexForbes Executive: Solutions and Enablement.

South Africans are urged to focus on future financial security and tap into the savings pot only when it is necessary.