Members whose employers do not pay contributions to the pension fund have recourse to the Pension Funds Adjudicator, who can order employers to pay a member the benefits they are due, and this order can be executed by a sheriff of the court, according to the Pension Funds Adjudicator Muvhango Lukhaimane.
Addressing the Pension Lawyers Conference, Lukhaimane said the bulk of complaints to her office concern withdrawal benefits and section 13A compliance i.e. the payment of contributions by employers. These two account for approximately 83% of all complaints finalised.
She said a negligible number of funds have approached her office for assistance with employers not paying contributions.
“Even in these instances, the Office of the Pension Funds Adjudicator (OPFA) can only assist with partial recovery of the debt as a portion thereof is affected by prescription. Most funds choose to act late against employers, thereby rendering a portion of the outstanding amount legally unrecoverable.
“Also, most funds fail to notify members that their employer had failed to pay contributions, leaving members to only discover such non-compliance at point of claim, which in certain circumstances results in a partial recovery owing to prescription.”
Lukhaimane said an emerging front for contention is also the calculation of overdue payment interest. Because it is compound and meant to be punitive in nature, employers often delay by contesting its calculation.
“The OPFA is, therefore, considering leaving the overdue payment interest out of its orders, especially where a member complained, and may only order the payment of fund interest. The fund will thus be at liberty to pursue the claim for overdue payment interest,” she said.
Lukhaimane’s comments come after the Financial Sector Conduct Authority (FSCA) updated its list of companies and entities that have not paid the required pension fund contributions, and according to the FSCA, these companies amount to about 4,000.
The FSCA initially published the list of defaulting employers on September 1, 2023, listing 5,430 employers who had contravened section 13A of the Pension Funds Act (PFA) – which prescribes how payments and other benefits should be made to a retirement fund.
According to the authority, about R7 billion in contributions remain unpaid, with companies falling behind between five months and 252 months (21 years) in outstanding payments.
“Pension funds must ensure that proper records of the reports relating to arrear contributions are kept as required in terms of the PFA, and that reports to the Authority in this regard are accurate and submitted promptly,” the group said.
The FSCA said if the employer does not pay over contributions for a period of three months, the insurer will repudiate the claim based on outstanding premiums, and the dependants, in the case of a death benefit, will not be paid the insured portion of the death benefit payable from the fund.
Lukhaimane said the FSCA list includes many security companies that have not paid contributions to the Private Sector Security Provident Fund for their employees as agreed.
“Quite a substantial portion of those arrears may be unrecoverable due to prescription as most funds have only notified the FSCA of employers in arrears but have failed to institute legal proceedings to recover such arrears on behalf of members.
“This is disappointing as funds must pursue these outstanding contributions. When contributions are outstanding for three months, the fund trustees are obliged, in terms of the Pension Funds Act, to lodge a criminal case with the South African Police Service and hold the responsible person at the employer liable. The responsible person or even the full board of directors can be fined up to R10 million or imprisoned for up to 10 years,” said Ms Lukhaimane.
Meanwhile, the Congress of South African Trade Unions (Cosatu) has called for urgent action to be taken against employers failing to pay contributions owed to workers’ pension funds.
“Cosatu welcomes the comprehensive report by the Financial Sector Conduct Authority (FSCA) into the large number of employers in both the private and public sectors, who owe billions of rands in employer and employee contributions to workers’ pension funds.
“The report, following on previous reports, provides a harrowing insight into the state of pension funds and their administration. Over 4,000 employers, largely in the security, cleaning, metals, engineering, and municipal sectors have been failing to pay for months and in many instances, years at a time, monies due from employers and monies deducted from workers’ salaries to their pension funds,” the union said.
According to Cosatu, workers pay the price as their insurance and funeral policies lapse due to non-payment. Workers’ savings that are meant to take care of them in retirement, are denied the monies needed to ensure they are sufficient and grow with interest.
“These non-payments constitute theft and fraud by the employers. The failure of pension fund trustees who fail to report such matters to the relevant authorities, law enforcement, and workers is a criminal offence.
“Whilst the FSCA has reported some positive progress with an estimated 90 employers making settlement plans in the past year, this is a drop in the ocean,” it said.
“The only way that this whole-scale theft of workers’ hard-earned pensions and wages by employers will be halted, is for these employers, finance and human resource managers and pension fund board trustees to be arrested, personal assets attached, prosecuted and imprisoned. We cannot continue to treat corruption with kid gloves or assume that the public sector has a monopoly on it" Cosatu said.
The union said it would be requesting an urgent meeting at Nedlac with the FSCA and National Treasury as well as Business Unity South Africa and the Association for Savings and Investment South Africa, to craft a way forward to ensure that workers’ monies are paid and those implicated held accountable.
PERSONAL FINANCE