Thousands denied pensions as employers fail to pay

A large number of municipalities and private employers who did not pay employees’ contributions over to pension funds may face investigations.

Their non-payments have tipped the new two-pot retirement system into turmoil.

The employers are facing imminent investigation by the department of employment and labour, which is planning to flood them with labour inspectors to check their compliance status.

Long list of companies, municipalities that violated pension fund

They will also be sanctioned by the Financial Sector Conduct Authority (FSCA) which has a long list of private companies and municipalities that violated the pension fund rules and the law.

An FSCA report showed municipalities and firms, mainly in the security and cleaning sectors, owe their employees approximately R5.2 billion in outstanding pension fund contributions impacting 31 000 people, with some cases dating back to the 2000s.

Of the outstanding contributions, some R1.4 billion is owed by municipalities, affecting pension fund members’ savings.

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The FSCA identified around 7 770 noncompliant employers, with 2 330 of them being publicly listed for violating Section 13A of the Pension Funds Act.

Many employees, who were hoping to claim from their pension funds under the two-pot scheme, are crying foul after hitting a brick wall when they attempted to claim the 30% due to them under the two-pot system, which came into effect last year.

The system has two pots – one is for savings and constitutes one third which goes into a savings pot and is accessible for withdrawal since September last year. The other two-thirds goes into the retirement pot to be kept in the fund until the pensioner’s retirement age.

Employees found their monies had been withheld

The distraught employees found that their monies had been withheld by employers, particularly municipalities and the security and cleaning sector, that were all blacklisted by the FSCA.

This means the contributors cannot claim the saving portion of their contributions.

The Congress of SA Trade Unions (Cosatu) has taken up the matter on behalf of the affected workers, who inundated their various unions with complaints about how their employers had inconvenienced and prejudiced them due to nonpayment of their pension fund contributions.

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Cosatu parliamentary coordinator Matthew Parks said Cosatu has established a task force with the FSCA, National Treasury and the Association for Savings and Investment South Africa (Asisa) at the National Economic Development and Labour Council to deal with this crisis.

Asisa represents the collective interests of asset managers, collective investment scheme management companies, linked investment service providers, multi-managers and life insurance companies.

Parks said: “It has the potential to get out of control. We’re engaging the different sectors. Engagements have taken place with the SA Local Government Association and more are planned.”

Potential to get out of control

The department agreed to issue a ministerial directive to labour inspectors to check pension fund compliance by employers.

The department also increased the number of labour inspectors from 2 000 by 10 000 this year and 10 000 to be hired next year.

The FSCA is working with the National Prosecuting Authority to pursue criminal sanctions against offenders.

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