Majority of complaints about withholding of contributions

Advocate Matome Thulare, Deputy Pension Funds Adjudicator

The majority of complaints received by the Office of the Pension Funds Adjudicator (OPFA) in the 2019/20 financial year related to non-payment of contributions by employers.

Matome Thulare, Deputy Pension Funds Adjudicator, said in the tribunal’s operational report that responses regarding the responsibility of the fund and the board of management in this regard remained “ambiguous and suggested poor governance and inadequate fund administration”.

The OPFA has taken a policy position to refer back section 13A related matters (non-payment of contributions) to the fund and request the fund to provide proof of compliance with applicable legislated governance and administrative processes before considering a matter for relief.

“This will assist in identifying exact points of failure in the value chain and ensure that determinations are specific and clearly identify root causes, including those responsible for possible further action by the regulator.

“In the current circumstances, and considering the bleak economic outlook, the employer’s ability to pay over contributions to the fund will be a critical non-compliance risk area.

“The boards of management and funds, including administrators, need to rise to the occasion and tighten their governance and administration processes to ensure minimum exposure of pension fund members’ interests,” Thulare said.

The Private Security Sector Provident Fund (PSSPF) continues to occupy a significant amount of the OPFA’s resources, with the high number of complaints from the security sector.

The non-compliance had to do with the supine attitude of the board not to collect the necessary contributions from employers in terms of section 13A of the Act.

“In a move that can only be described as inexplicable and not being in the best interest of members, the newly established National Bargaining Council for the Private Security Sector has not provided for the collection of pension fund contributions in its mandate and this is quite regrettable,” said Thulare.

He said the OPFA remained concerned about the disservice which members of the PSSPF experienced and, therefore, questioned whether this fund was fit for the purpose for which it was established. He suggested someone should be whispering in the ear of the Minister of Employment and Labour that a compulsory fund for the private security sector is not viable.

The municipal sector was also a major defaulter on section 13A. The inability of some of the municipalities to run their affairs prudently has seen the intervention of government and appointment of administrators. Invariably, the competing needs to provide service delivery and at the same maintain financial commitments such as pension contributions, resulted in default by municipalities to pay over contributions.

The impact of such a failure is that members will receive reduced benefits on retirement and their families are often left in the lurch should they pass away, with the burden of unpaid risk benefits i.e. funeral and lumpsum death claims.

Thulare said 60% of complaints concerned withdrawal benefits, up 3% from last year.

“These types of complaints paint a picture of desperate members seeking to access their benefits in circumstances where they have been failed by their funds. Most complainants only become aware that the employer has not remitted contributions on their behalf upon leaving service and claiming benefits.

“It is unfortunate that the funds do not comply with their legal obligations in terms of Regulation 33 to inform the members of the non-compliance of employers with section 13A whilst they are still in service and can do something about it.”

Thulare said the provision of benefit statements remained another issue of concern. The practice of funds to use the HR departments of the employers to disseminate the benefit statements constituted a breach of fiduciary duties.

The allocation and distribution of death benefits together with the withholding of benefits on the request of employers remain matters of concern for funds to deal with in compliance with the Pension Funds Act.

If members were provided with benefit statements, it would enable them to take steps against the employer and demand that contributions are remitted to the funds. Benefit statements contain important information to assist members with retirement planning and the need to supplement their retirement savings, where appropriate.