The Pension Funds Adjudicator (PFA) is calling for greater accountability from retirement fund trustees in addressing the non-payment of contributions by participating employers.
With the introduction of the two-pot retirement system on 1 September, a rush by members to withdraw from their savings component has exposed significant maladministration. Many security firms, municipalities, and other employers have been withholding contributions. This long-standing issue, where employers deduct contributions but fail to hand them over to funds, remains a serious concern. Last year, the FSCA identified thousands of employers that have not paid contributions.
According to the Office of the Pension Funds Adjudicator’s recently published 2023/24 report, complaints related to withdrawal benefits and non-compliance with section 13A of the Pension Funds Act – non-payment of contributions – remain the most dominant. These two categories accounted for 84% of the total closed complaints.
Often, members only discover that their employers have failed to pay contributions when they attempt to withdraw their benefits. Almost 50% of such complaints originate from members of the Private Security Sector Provident Fund.
At the Institute of Retirement Funds Africa conference held this week in Cape Town, the PFA, Muvhango Lukhaimane (pictured), highlighted the gravity of the issue, noting that her Office has been summoned to Parliament to explain the situation.
She emphasised that responsibility should not rest solely with employers, but also with trustees and funds’ boards of management.
“And I raise it here because most of you who are attending are retirement fund trustees and administrators. I raise it here because all of you that might have heard me talking about this issue on any platform, I always locate the responsibility to collect the contributions and make sure that they are properly allocated, I always locate that responsibility to yourselves as trustees. And it remains like that,” Lukhaimane said.
She said one of the recommendations her Office will present to Parliament is that assigning “some level of personal responsibility to trustees” could potentially result in a change in the levels of non-payment of contributions by participating employers.
“Instead of saying penalties must only be levied against the employers and the persons responsible, maybe some level of responsibility should be located with the trustees and the boards because they are failing to even do one little step of what they are supposed to do,” Lukhaimane said.
Board representatives at the conference had mixed reactions to the Adjudicator’s call for expanded accountability in managing unpaid contributions.
Bongi Mkhize, the principal officer of the KwaZulu-Natal Joint Municipal Pension Fund, expressed surprise and concern over the suggestion.
“I’m not happy about it, especially knowing that I’m dealing with 55 municipalities who are employers for my fund. How am I supposed to ensure that I take the beating for them not paying contributions on time?”
Mkhize said he is trying his best to recover anything that is not paid.
“But I should not be held liable for not getting those contribution, because I’m not responsible for paying the contribution. My responsibility is to receive contribution and allocate contribution accordingly, and I don’t think it’s fair for the funds,” Mkhize said.
On the other hand, Maemu Makhado, deputy principal officer of the Telkom Retirement Fund, welcomed the idea of expanded responsibility. “I think it’s a good thing,” Makhado said, emphasising the fiduciary duty funds have to their members.
“If we are not taking proactive steps and just saying, ‘there’s nothing we can do about it’, then we’re not fulfilling our responsibility.”
Makhado said trustees and principal officers need to go beyond administrative reports and actively ensure contributions are made on time.
“We should be directly communicating with the employers and reporting if necessary. We can’t just be laid back, because some members don’t even know that contributions are not being paid,” she said.
Name-and-shame campaign
In June 2022, the FSCA said it would publish, every quarter, the names of employers that fail to pay employees’ retirement fund contributions over to the fund. The FSCA followed through on this undertaking, publishing the first list in August last year.
Read: Arrear contributions: publishing employers’ names ‘is having an impact’
Lukhaimane told conference attendees that, in line with the FSCA’s name-and-shame initiative, her Office will be consulting with retirement funds and their trustees to determine the parameters for a similar undertaking.
“Our stakeholders and the complainants and everybody say to us, why is it that you are not naming and shaming the funds, the administrators, the employers, the principal officers, everybody who has done something that they are not supposed to do? But we want to do that in a regularised manner, so that even when you complete doing something, you know that if we find out of that, we are going to out you,” she said.
Lukhaimane said her Office will outline the instances where “naming and shaming is the basic thing that we must do so that members of the public know not to do business with you, or know to do business with you, taking precautions for all sorts of things”.
She said the OPFA would not be performing a service to the public if it sat on things. “Then the repercussions at the end affect too many people that could have acted timeously had they known the kind of administrator that you are, the kind of fund that you are, the kind of principal officer that that you are.”
To ensure fairness, Lukhaimane added: “We will sort of give you a framework so that it doesn’t catch you off-guard, that you are very aware of what is there.”
Aggressive complainants
Lukhaimane shared that another reason for the OPFA’s to name “people that are not doing the correct thing” stems from aggressive complaints and dissatisfaction with the Office’s service levels.
“We are getting very, very, very difficult complainants that almost, I can say, terrorise staff in the Office with their emails, the language they use, the number of times they call. This issue has even driven us to a point where we have implemented a policy just to deal with difficult complainants,” she explained.
Lukhaimane noted the complexity of balancing public dissatisfaction with ensuring funds are held accountable.
“That is the other side of why we would also like to say to members of the public, yes, we know that you are angry with us for giving this fund this much time to respond. But when we have a look at our list, they are already there as one of the worst-performing funds, and everything. We are aware of that; therefore, let us still help you.”
