20 years of pension savings down the drain
The two-pot system has shown that many employers did not pay into their workers' pension funds. This has left employees without retirement savings or benefits.
Over 3,000 companies felt the impact when workers accessed part of their pensions. They discovered that no funds were available.
Some of these employers have not contributed to their workers' pension funds for up to 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He explained that about R21 billion has been withdrawn so far. This amount will likely increase. SARS is expected to generate around R5 billion.
Since the two-pot system started in September, he said many issues have come to light. Regulators were not aware of these problems before.
This includes the problem of not paying pension funds.
Mongwai said, “The truth is that companies, especially municipalities, often face cash flow problems.”
As a result, many have not been able to make the required pension fund contributions.
Pension Funds Adjudicator Muvhango Lukhaimane spoke on Newzroom Afrika. She said companies have not taken the steps needed to prevent this problem.
She said that some businesses are having money problems. However, many pension fund rules help employers in financial trouble.
However, many people do not start the process to ask for help.
Issues with oversight and monitoring have also added to this problem.
Mongwai explained that trustees find it hard to make sure all the companies they oversee follow pension rules. They have many businesses to manage.
Lukhaimane explained that the lack of monitoring from the side of pension funds is especially concerning.
"The funds are not enforcing rules as they should," she said. "If employers see that the fund is weak in enforcement, they will take a chance."
The fund must ensure that employers pay their contributions. If employers fail to pay, the fund must take steps to recover those contributions for its members.
Legal progress has been made to help with this issue. Not paying pension contributions is now a crime. Those responsible may go to jail. However, problems with governance still exist.
Many pension funds can take action, but many still do not follow the rules. This is mainly due to a lack of accountability.
"Until now, no board member of a fund has been held responsible for not following up on these issues," Lukhaimane said. "That is why funds often ignore them."
She said that larger insurance companies often avoid enforcement. They do this by ending an employer’s participation in the fund after 90 days of non-payment.
"Members never really learn that the fund was terminated because their employer was not paying."
Your big insurers avoid enforcing the payment of contribution funds. They do this by closing that part of the fund and liquidating it.
Lukhaimane explained that employees who notice missing pension funds should first complain to their employers. This gives employers a chance to fix the problem.
However, if the person is still working for that employer, they are in a weak position.
When they ask why their payments haven’t come, “they can even be dismissed in some cases.”
For this reason, members may find it helpful to complain to their pension fund. If the issue isn’t resolved, they can then contact the Pension Funds Adjudicator.
Lukhaimane warned that pension funds have a time limit. This means members must claim within a certain period.
In most cases, Lukhaimane said, the Adjudicator can only recover contributions for the last three years for these members.
"Check your balance with your fund. If you don’t get your annual benefit statement, that’s a warning sign. Start asking questions."
The Financial Sector Conduct Authority (FSCA) has decided to "name and shame" employers who do not pay.
This method goes back to before the start of the two-pot system.
In September 2023, the FSCA released the names of employers who had not paid their contributions. This was one year before the two-pot system began.
This message listed 3,262 employers who broke section 13A of the Pension Funds Act. This section explains how to pay contributions and other benefits to a retirement fund.
"The FSCA reported that 5,430 employers broke section 13A of the PFA as of April 30, 2023," the authority said.
"28% of employers had unpaid contributions for one month. 24% had them for 2 to 12 months. 23% had them for 13 to 60 months. 25% had them for five or more years."
"This publication shows only those employers who have outstanding contributions for four months or more."
The FSCA keeps updating the list. However, members should also check their pension contributions on their own.
The truth is that the new system wants to protect people’s retirement savings. However, if employers do not pay their contributions, there is nothing to protect, Mongwai said.
As a result, these people will rely on the government.
Do you need a Quote for our Tax and Accounting Services?
Contact our team via any of the following channels to get a proposal for your accounting and tax services:
Subscribe to our newsletters.
Purchase Contract TEMPLATES and BUSINESS STATIONERY at www.ZEELIEONLINE.com
Disclaimer:
The views or opinions expressed on this site are solely those of the original authors and other contributors.
The material and information contained on this website is for general information purposes only.
This information is for general purposes only. Don't use this information for making business, legal and tax decisions without consulting a professional.
We do not make any express or implied representation, as to the completeness or accuracy of the information published.
Tax law regularly changes, so any tax information on this site could become outdated.
We are not responsible for any other websites that you may access through links on our website.
ZPA accepts no liability for any loss or damage arising from the use of any material on this site.
