The Office of the Pension Funds Adjudicator (OPFA) is proposing to increase its levy for 2024/25 by 35%. If implemented, the increase will result in registered retirement funds paying R10.38 per eligible member instead of R7.70.
The increase is necessary to ensure that the legislative changes affecting the OPFA are “implemented optimally to achieve the desired outcomes of an improved, independent, and more effective alternative dispute resolution mechanism”, the OPFA said in a document explaining its budget and levy proposals for 2024/25.
The Minister of Finance will have to submit the proposed increase to Parliament for approval because it is higher than the average Consumer Price Index (CPI) in the preceding calendar year. CPI averaged 6.9% in December 2022, according to Statistics South Africa.
A CPI-linked levy increase, or an increase below CPI, does not have to be approved by Parliament.
The commencement this year of the Financial Sector and Deposit Insurance Levies Act, and concomitant changes to the Pension Funds Act, have made the OPFA and the FAIS Ombud independent of the FSCA in respect of their funding and accounting functions.
Table E in Schedule 5 to the Levies Act sets out the formula for calculating the OPFA levy.
The formula compromises a base amount and a variable amount. The OPFA does not propose to increase the current base amount of R0.
The variable amount (currently R7.70) is multiplied by the number of eligible retirement fund members, or “L”. These are members and other persons who receive regular periodic payments from a pension fund as reflected in the fund’s latest annual financial statements submitted to the FSCA as at 28 February of the preceding levy year. Beneficiaries and members with unclaimed benefits are excluded.
The number of eligible pension fund members was reported at 10.8 million as at 28 February 2023, the OPFA said.
There is no cap on the levy payable to the OPFA.
The increase in the OPFA levy is in addition to the proposed 6% increase in the levy payable by retirement funds to the FSCA.
Table B in Schedule 2 to the Levies Act sets out the formula for calculating the FSCA levy.
The FSCA is proposing to increase the base amount from R2 000 to R2 120 and the variable amount from R16.20 to R17.17 per eligible member in 2024/25.
The maximum amount payable by occupational funds will increase from R5m to R5.3m. The cap for preservation funds and retirement annuity funds will rise from R15m to R15.9m.
Budget proposals
For the 2024/25 financial year, the OPFA has budgeted for gross revenue of R108 million (budget 2023/24: R90m), operations expenditure of R100m (R94m), and capital expenditure of R8m (R5m), resulting in a breakeven position.
Levies account for 99% of the gross revenue, with the balance of R1.068m from interest income Included in the levy budget is the special levy of R7m (budget 2023/24: R6m) to cover establishment costs and other expenses that are not part of the ordinary course of discharging the OPFA’s mandate.
The operations expenditure of R100m comprises staff expenditure of R62m (budget 2023/24: R58m) and general expenditure of R38m (R36m). Staff expenses represent 57% of the R108m, general expenditure 35%, and capital expenditure 8% of the total expenditure budget.
According to its annual report for 2022/23, the Office received total revenue of R83 564 345 (including interest income of R834 816) and incurred expenditure of R79 159 695.
Click here to download the OPFA’s budget and levy proposals for 2024/25.
Submissions on the documents must be made on the comments template and sent to levycomments@pfa.org.za by 31 October. (Use “Budget 2024 comments” as the subject of the email for ease of reference.)
