Cape Town - The high interest in withdrawal claims from the two-pot retirement system has exposed the failure of employers to pay pension contributions.
The Parliament’s Standing Committee on Finance was briefed by the Pension Fund Adjudicator and the Financial Sector Conduct Authority (FSCA) on the implementation of the two-pot system and the failure of employers to pay pension contributions.
The briefing took place at the National Council of Provinces Building, Parliament, on Tuesday.
Committee chairperson, Mkhacani Maswanganyi, said the matter was taken up due to a number of growing complaints and a rising number of employers defaulting on their employee payments.
“What is disturbing is that the number keeps on growing… you ask yourself as to how many employees are affected if now the number of employers is getting into the thousands… This is a serious crime that is committed against humanity.”
Pension Fund Adjudicator, Muvhango Lukhaimane, said for September and October, there were 1144 enquiries received related to the two-pot system. The bulk of the enquiries related to payment status with 267 enquiries received, and 143 enquiries received for withdrawal procedures.
“I think the main issue that was also triggered for most people during the implementation of two-pot was the scale of non-payment of contributions by employers,” Lukhaimane said.
A number of administrative issues were noted, namely the failure of administrators to register employers efficiently; registering employees when notified by employers; allocate contributions to member records and thus affecting risk benefits; providing members with benefit statements; keeping proper member records; and payment of benefits when claimed.
“At present, one of their biggest problems is that they sit with unallocated contributions.
“And I’m not talking five million, I'm not talking R100 million, I’m talking hundreds of millions that sit in a bank account unallocated to members.
“The employers pay but the fund has no capacity to say this belongs to X and therefore what happens, is they don’t pay over premiums and claims are rising between and members left in the lurch. So that is a big problem,” Lukhaimane said.
The top ten funds as shown by complaints received over section 13A non-compliance or withdrawal benefit complaints from 2019 to September 2024 were: Private Security Sector Provident Fund; Transport Sector Retirement Fund; Contract Cleaning National Provident Fund; Alexander Forbes Retirement Fund (Provident Section); Alexander Forbes Core Plan (Provident Section); Security Employees National Provident Fund; Metal Industries Provident Fund; The Hospitality And General Provident Fund; Corporate Selection Umbrella Retirement Fund No 2; and Old Mutual Superfund Provident Fund.
FSCA Deputy Commissioner, Astrid Ludin, said in terms of two-pot component withdrawals, the South African Revenue Service (SARS) issued 1.9m tax directives to the value of R35bn.
“Of course, all of it hasn’t necessarily been paid out yet.”
According to FSCA information as of November 8, the number of claims submitted was 914 602 and the number of claims paid out was 897,349.
The value of the claims paid out was R7 393 781 936 with 382 731 claims still pending.
About 60% of claims received were in September. An estimated 40% of eligible members have submitted a claim.
According to information obtained from three major administrators, the highest claimants (93%) had pensionable salaries of less than R550000 per annum.