Members lose R7bn in unpaid pension fund contributions

ERRANT employers are responsible for about R7 billion in unpaid pension fund contributions.

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. This order can be executed by a sheriff of the court.

Addressing the Pension Lawyers Conference, Pension Funds adjudicator Muvhango Lukhaimane said the bulk of complaints to her office concerned withdrawal benefits and Section 13A compliance in the payment of contributions by employers. This accounts for approximately 83% of all complaints finalised.

Lukhaimane said that a negligible number of funds had 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.”

Lukhaimane said an emerging front for contention was 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 considering leaving the overdue payment interest out of its orders, especially where a member lodged the complaint, and may only order the payment of fund interest. The fund will thus be at liberty to pursue the claim for overdue payment interest.”

Lukhaimane said members often only find out their contributions have not been paid to the fund when they claim on a funeral policy, group life or disability policy, or when they withdraw from the fund or retire.

She said members need to know about the outstanding contributions in time so that they do not lose out because of prescription.

Claims not made within three years of an employer failing to pay contributions prescribe, and Lukhaimane said more than 50% of awards her office made for the complaints about arrear contributions were compromised by the fact that part of the claim had prescribed.

Prescription has affected both individual members and funds acting on behalf of members, she said.

The Financial Services Conduct Authority has published a list of errant employers that runs to around 4 000 employers and includes many security companies that have not paid contributions to the Private Sector Security Provident Fund for their employees as agreed.

Lukhaimane said quite a substantial portion of those arrears may be unrecoverable due to prescription.