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Pension Fund owed an estimated R58-M by Municipality

16 April 2019 Pension Funds Adjudicator
Muvhango Lukhaimane, Pension Funds Adjudicator

Muvhango Lukhaimane, Pension Funds Adjudicator

The Kopanong Local Municipality in the Free State failed to pay an estimated R58 million in contributions on behalf of its members to a pension fund.

This emerged during an investigation by the Office of the Pension Funds Adjudicator following complaints by several employees of the municipality.

The complainants said the third respondent, Kopanong Local Municipality, deducted pension fund contributions from their salaries but did not pay this to the first respondent, South African Local Authorities Pension Fund.

In its response, the second respondent, Fairsure Administration (Pty) Ltd, submitted that the third respondent had not paid contributions since March 2013 in contravention of the first respondent’s rules. This was despite monthly communication that was sent to the third respondent regarding the status of the unpaid contributions.

The second respondent also said complainants had been informed that the third respondent was in arrears with contributions and added that the first respondent was in discussion with its legal representatives for assistance in the collection of the outstanding contributions.

The second respondent said while it was unable to confirm arrear contributions in respect of each individual member of the fund, the third respondent was in arrears for an estimated amount of R58 347 794.69.

The third respondent was afforded the opportunity to respond to the complaint. However, it failed to file a response.

In her determination, the Pension Funds Adjudicator, Muvhango Lukhaimane, said the third respondent had contravened the Pension Funds Act by failing to pay all contributions in respect of the complainants.

She also said while the second respondent had indicated that the first respondent was in discussion with its legal representative to assist in the collection of the outstanding contributions, it did not appear that any legal steps had been instituted against the third respondent.

She also noted with concern the failure of the first respondent to take action against the third respondent for non-payment of pension fund contributions.

“The board of the first respondent ought to have advised the Financial Sector Conduct Authority of the third respondent’s failure to pay contributions and taken action to remedy such.

“Other than sending letters to the third respondent, this Tribunal is not aware of any legal action taken by the fund to remedy the situation since it became aware of the default by the third respondent in 2012,” said Ms Lukhaimane.

Ms Lukhaimane was critical of the first respondent for failing to get the third respondent to provide the name of the person who could be held personally liable for the non-payment of contributions and have their assets attached, if necessary.

‘Therefore, the first respondent must be proactive in order to ensure accountability and better protection of the interests of members.”

The third respondent was ordered to provide the first respondent with contribution schedules in respect of the complainants in order to determine their outstanding contributions, within two weeks of the determination.

The third respondent was ordered to pay the arrear contributions with interest in respect of the complainants to the first respondent in order for the latter to update their records.
The first respondent was ordered to provide the complainants with a breakdown of their contributions and latest benefit statements.

Quick Polls

QUESTION

With regards to the COFI Bill, do you believe lumping the health and finance sector in the same basket will sustain the financial sector?

ANSWER

Yes, it forms part of the FSCA’s mandate to protect and maintain the sustainability of the financial sector, and to legislate fairness and make it the law
No, the products are different therefore the health sector should not have to be subjected to similar conduct requirements
This will cause problems. More consultations should be conducted before the final version of the COFI Bill is sent to Parliament for promulgation
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