Two-pot system has exposed thousands of employers who have left workers with no pension funds.File Picture
THE two-pot system has exposed thousands of employers who have left workers with no pension funds and other benefits because they have “stolen” fund money.
The non-compliance only come to light when people were allowed to access a portion of their pension funds, but found there was nothing in the pot.
In one case, a municipality was ordered by a court to pay back R35 million, but if it was to fulfil that order the council would have no money to pay salaries.
Industry regulator the Pension Funds Adjudicator said yesterday that to date it had not received any two-pot-related complaints, only enquiries.
Among the hardest hit are municipal and security workers either because unscrupulous employers did not pay in the money deducted from wages or they only paid in a portion of it. Like other workers they had hoped that through the two-pot system they would have access to some of their pension funds to service urgent needs, like paying their bonds or debt or for their children’s education, but to no avail.
Despite their indispensable roles in society, they remain some of the lowest earners in South Africa.
The South African Municipal Workers Union (Samwu) said most of the affected municipal workers were in the Free State where 13 municipalities out of a national total of 37 had defaulted on payments, some for a number of years.
Cosatu wants swift action taken against errant employers and demanded that they pay back the money as well as the interest the workers would have earned. The trade union federation said it would be one of the key points of its nationwide strike action planned for Monday.
“It’s like actually stealing from the poor. It’s fraud, it’s corruption and it’s something that needs to be dealt with accordingly,” said Cosatu KZN Secretary Edwin Mkhize.
He said by lobbying for the two-pot system Cosatu had uncovered a massive problem and it was time for accountability and consequence management.
“Many of our members would have only realised when they go on pension that there’s nothing in the purse and really, that would have been a nightmare. We believe there are many workers who have been victims, but you may find that they are dying in silence because it can’t be that this thing is only happening now,” said Mkhize.
He said often officials who were responsible for these institutions accounted to parliamentary committees and talked about money that was lost, but nothing happened to them.
“We want to get to a stage where all those companies will have to have their day in court to go and actually account for this fraud they’ve committed against the workers. Sometimes our members go on retirement and then they get a lump sum and the fund has to keep some portion for you to earn every month as part of your pension. But some members do not even enjoy that benefit and after a few months they pass on. We’ve never reached a point where we are able to ask: what happens when the funds keep a certain portion and then you die? It means that millions of rands belonging to workers get lost somewhere,” said Mkhize.
He has also blamed the industry regulator for failing to uphold or to institute measures to protect workers’ money.
“You have companies, you have pension fund managers that have been reported for having stolen the monies of workers from the pension fund, even some big institutions. But we have a regulator whose primary mandate is to ensure there is proper management of the finances of workers. And every time they fail the workers there is no consequence,” he said.
Samwu’s Free State secretary Thabang Tseuoa said they were enraged that the matter had been allowed to drag on.
“The pension funds have to act. When this non-payment exceeds 90 days, they have a responsibility to open criminal cases, which has not happened in any municipality. You can check in South Africa: where has a pension fund opened a criminal case against the municipal manager, the CFO, and they’ve been found guilty? You will not find a single municipal manager or CFO having been fined for non-payment of pensions,” said Tseuoa.
He said that in a court case in the Free State involving the Municipal Workers Retirement Fund versus Mafube, a local municipality, the court ordered the municipality to pay R35 million in arrears.
“Now if the court order says you must pay R35 million, and they’re not paying because it’s beyond their financial means, what’s going to happen? Your pension fund would then attach a bank account of a municipality to service that particular debt. Who’s suffering again? An employee who’s not going to get a salary because now a bank account is attached. So there’s double jeopardy on the employee: they have lost on the pension benefits and they’ve lost on the salary.”
He said the pension funds were complicit by allowing an accrual of close to R40 million before they acted. Tseuoa said the government, Treasury and Cogta had done nothing about the situation.
Pension Funds Adjudicator Muvhango Lukhaimane said workers should immediately lodge complaints with her office or with relevant bargaining councils if they suspected their contributions were not being paid.
“With our latest annual report to March 2024 (before the two-pot system came into effect), 84% of the complaints finalised involved a non-compliant employer. This problem is across all sectors of the economy – sometimes it is hidden in fund liquidations,” said Lukhaimane.
“This is concerning because it not only affects the member’s retirement savings but other risk benefits that are dependent on settlement of premiums by funds to third parties such as death, disability and funeral benefits, leaving members further vulnerable at times of great need.
“We can only deal with individual complaints and if a fund does not lodge a complaint on behalf of all its members, we can only finalise the complaint for the individual member that lodges the complaint even though we can see that the employer is non-compliant for all its employees,” she said.