Two-pot retirement system sparks rise in complaints over employers not paying in contributions

CapeTalk's Africa Melane is joined by the Deputy Pension Funds Adjudicator, Naheem Essop. 

The introduction of the two-pot retirement system has been a lifeline for many people since it was implemented almost a year ago.

However, as contributors try to access the savings part of their retirement money, it has exposed the extent of employers who have not been paying over contributions to their pension funds.

The majority of complaints to the Office of the Pension Funds Adjudicator (OPFA) have come from members who've experienced this.

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The Office received 10 331 complaints in the past financial year, an increase from the previous year of about 12.5% - translating into an average of about 41 complaints a day.

Deputy Funds Funds Adjudicator Naheem Essop says approximately 82% of the complaints related to Section13A compliance issues, specifically employers not paying over contributions or withdrawal benefits.

They'd been anticipating this, he says, having beaten the drum about the issue for some time before the two-pot system was introduced.

"We anticipated that once this system came into effect there would be a lot of members who'd be surprised to know that their employers haven't been paying their contributions, so when they want to withdraw from their savings pot they go to their pension fund who then informs them that their employer hasn't been paying contributions."

Naheem Essop, Deputy Pension Funds Adjudicator

"Even worse is that the risk benefits normally attached to a pension fund such as the death benefit or a disability benefit, will lapse. In the event of a member passing away or becoming disabled during that period, family members or they themselves are then normally left stranded without any kind of financial relief."

Naheem Essop, Deputy Pension Funds Adjudicator

Not paying over these contributions is a statutory crime under the Pension Funds Act, with the guilty party liable for a fine of up to R10 million, a ten-year prison sentence or both.

The legislation requires the trustees of the pension fund to monitor whether contributions have been coming in, Essop says.

After a period of 90 days of non-payment, they're required to report the case to the police, but many trustees or pension funds are not actually doing this, he adds.

If you're worried about your own employer with regard to your pension fund contributions, approach your fund and ask for a benefit statement.

If you find your contributions are not being paid in, you can lodge a complaint with OPFA, who will then investigate.

For more detail, listen to the interview audio at the top of the article