Two-pot withdrawals to expose dodgy employers

The Pension Funds Adjudicator has sounded the alarm on companies that do not pay over employee funds to administrators as two-pot claims mount in the first week of the retirement savings system.

Pension Funds Adjudicator Muvhango Lukhaimane said their caseload for the financial year was 82% for complaints by workers whose employers were not paying their pension deductions to administrators.

She said they expected more complaints with the two-pot system coming into effect from last week.

Pension fund administrators have reported the surge of requests for withdrawals from workers with some fund managers reporting unprecedented numbers that have affected their systems. The two-pot system allows workers to withdraw once a year from their provident and pension funds.

However, over the years companies have come under fire for shortchanging their employees by deducting pensions from their salaries and not handing those deducted amounts over to administrators.

Security firms, retailers, municipalities, a church and a renowned fashion designer were among the more than 3,000 employers exposed by the Financial Sector Conduct Authority for not paying pension funds last year. Some have failed to do so for 21 years.

Lukhaimane said they expected more complaints from workers.

“Normally, workers would find out their pension fund balances during retirement, resignation or retrenchment. With the two-pot system they can access their pension once yearly at any time. This will expose employers who have not been paying the pension to the administrators. That process will be brought forward and we encourage workers to check their pension balances and come to us if they find discrepancies,” said Lukhaimane. 

She said they were expecting people coming forward in the next three months after they found out the true status of their pension balances.

The adjudicator said they invested in two contractors to manage and direct claimants.

Alexforbes received 150,000 withdrawal claims in 25 minutes on Thursday. They said they expected between R50bn and R100bn withdrawals this year. 

“Though we don’t capture explicit reasons for withdrawals, we intuitively know people are financially stretched. Some of the biggest reasons are to manage their debt and or monthly expenses,” said Vickie Lange, head of best practice at Alexforbes.

“We are receiving and processing claims. However, we are experiencing unprecedented traffic volumes on AF Connect due to the two-pot system. This is causing delays for online submissions. Our IT specialists are working to improve the client experience.”

The Government Employees Pension Fund which has more than 1.2-million members, said 40,000 of them had indicated plans to withdraw by Friday last week. The fund said there had been 17,050 savings pot withdrawals and this number increased every day.

“We are managing and tuning our systems to manage the increased load for two-pot, as well as the existing load on the self-service application. We are aware of members who have problems accessing the system and the GPAA [Government Pensions Administrations Agency] teams and client relationship management are attending to the queries and complaints.

“Part of attending to this query in particular is the process under way of developing a mailbox solely focused on queries relating to the two-pot system,” said Rakgwatha Mokou from the GPAA.

The Private Security Sector Provident Fund, which has more than 600,000 members who work as security guards and truck drivers, said 80% of its membership had shown interest in applying for withdrawal. Many were from Gauteng and KwaZulu-Natal.

The fund was implicated as one of the worst where employers were not paying pension deductions to the fund last year. 

Bianca Moyo from the fund said they had started making companies account. One intervention was to deploy agents to check on the company payment status. Noncompliant companies are also listed on the fund’s website to warn workers. 

Sanlam had received 70,000 calls about the two-pot system and 20,000 members applied for it. “This volume far exceeds the monthly average of 7,000 to 8,000 retirement, withdrawal or retrenchment claims usually processed by Sanlam Corporate. The average claim amount remained steady at R20,000,” said the company.

“Over the past two days, tax directives requests have been submitted and received back from Sars without delays. About 1% of the tax directive requests have been rejected by Sars, and for 13% of the requests, Sars issued an IT88.”

Lonwabo Nxumalo, a security guard from Ekurhuleni, said he applied for withdrawal to pay off his bank loans.

“I've been trying to pay the loans for more than five years but my salary is not enough to do so. I find this system an easier way to pay off the R20,000 debt,” he said.

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