Coke provident fund leaves only the dregs for retiree

After 21 years of service at multinational beverage company Coca-Cola, Martin Laminie was paid out only R140 000 with which to "retire".

Laminie, 63, said he had to share the money with his wife after a divorce and it did not last a year.

"I spent so many years at that company, and it's a big company always sponsoring everyone . but then it hardly gives its employees anything to live on when they retire."

The fight for a better retirement plan for lower-income employees at Coca-Cola's Fortune branch in George, Western Cape, has been going on for years. Issues were raised as far back as June 2010, according to minutes of a meeting seen by Business Times.

Nonlundi Mzimba from Coca-Cola Fortune said its fund was in line with best practices and its contribution rates were in line with standard practice.

Yet lower-income employees are unable to retire securely.

Documents show that staff contribute 6% of their salary directly to the provident fund covering lower-paid employees and the company contributes 8%. However, of the company's contribution, only 2.75percentage points go directly to retirement. The rest is eaten up by administration costs and death and disability benefits.

That means a grade1 employee earning R5383 a month will contribute R323 to retirement, while the company contributes a net R148.

There is a Coca-Cola pension fund for higher-paid staff. Here, the company contributes a minimum of 7.35% directly and this can be increased to 15%.

Unhappy employees asked to be moved to the pension fund, but the company refused. There were also calls for the provident fund to be moved to a cheaper administrator than NBC, the incumbent administrator, but again staff were shot down.

In a letter written to the trustees by a Mr Van Wyk, the principal officer of the provident fund, he referred to a complaint received in 2010 by employee representatives about the admin fees being too costly.

"At the trustee meeting held on July 5, 2011 it was agreed that other provident fund administrators would be requested to present to the board with a view for them to possibly tender for this service," the letter read.

However, at the following meeting in October that year the trustees said they were no longer interested in considering different administrators. This was after a number of these administrators travelled to Johannesburg to pitch to the board of trustees. The proceedings were cancelled on the day, which Van Wyk called "unprofessional and embarrassing".

Van Wyk said the decision not to consider other providers was not in the best interest of employees. He added that in most cases the proposed administration fees of other service providers were far less than what was being paid to NBC.

"These savings can be allocated to the retirement portion of the members, which is a direct benefit to the members."

Rowan Burger, the head of alternative products at Momentum employee benefits, said this issue was precisely why the National Treasury was investigating costs in the industry.

Laminie, who retired in 2013, was earning close to R6000 a month before he left. The payout he received of R140000 could at most only replace two years of his salary. He needed a payout closer to R900 000 - the recommended 15 years' salary - to retire comfortably.

However, the pension fund adjudicator determined that Coca-Cola Fortune's provident fund was sufficient.