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More Than a Week Into the New Two-Pot Retirement System, Complaints of Non-Payment by Employers Mount
More than a week has passed since South Africa’s two-pot retirement system came into effect, allowing workers to access portions of their pension savings once a year. While pension funds have received a surge of withdrawal requests, many workers have been left frustrated by their inability to access their funds due to employer non-compliance.
Pension Fund Adjudicator Raises Alarm
Pension Funds Adjudicator Muvhango Lukhaimane has revealed a sharp rise in complaints, particularly from workers whose employers have failed to make pension contributions on their behalf. “Just today [Tuesday], I received 76 complaints, with 82% of these related to employers not paying contributions to pension funds,” said Lukhaimane.
Among the most common offenders are municipalities and security companies, which have long been criticized for deducting pension contributions from employee salaries but failing to transfer them to pension fund administrators.
Surge in Withdrawal Requests
Pension fund administrators have been overwhelmed by the unprecedented number of withdrawal requests since the system launched. Alexander Forbes, one of the leading pension funds in the country, processed 150,000 withdrawal claims in just 25 minutes last Thursday. Vickie Lange, head of Best Practice at Alexforbes, noted that while the system was designed to help individuals access their savings, it has caused delays due to high traffic on their platforms. “We are experiencing unprecedented traffic volumes on AF Connect due to the two-pot system. Our IT specialists are working to improve the client experience,” Lange said.
The Government Employees Pension Fund (GEPF), which has over 1.2 million members, reported that by Friday last week, 40,000 members had expressed interest in making withdrawals. Fund administrators have scrambled to manage the increased load, with the Government Pensions Administration Agency (GPAA) establishing a dedicated system to handle two-pot system-related queries.
Employer Non-Compliance: A Widespread Problem
For many workers, the excitement of being able to access their pension savings has been overshadowed by the discovery that their employers have not made the necessary pension contributions. Over the years, some companies, particularly in the security sector and certain municipalities, have been notorious for this form of non-compliance. Lukhaimane noted that the two-pot system would now shine a light on such practices as employees regularly check their pension balances.
“Normally, workers would find out their pension fund balances during retirement, resignation, or retrenchment. But with the two-pot system, this process will be brought forward, and we encourage workers to check their pension balances and come to us if they find any discrepancies,” she added.
Last year, the Financial Sector Conduct Authority (FSCA) named over 3,000 employers, including security firms and retailers, as non-compliant. Some employers had been neglecting to pay pensions for over 20 years.
Financial Relief Amid Rising Debt
For many workers, the new system has come as a financial lifeline, allowing them to settle debts and manage monthly expenses. Lonwabo Nxumalo, a security guard from Ekurhuleni, shared his story of struggling with debt for over five years. “I’ve been trying to pay the loans for over five years, but my salary is not enough. I find this system to be an easier way to pay off my R20,000 debt,” Nxumalo said.
Looking Ahead
With the two-pot system still in its early stages, Lukhaimane and other pension fund administrators anticipate a further surge in complaints and withdrawal requests. The FSCA and pension fund managers are closely monitoring employer compliance, and workers are urged to regularly check their pension balances to ensure their contributions are being properly handled.
The introduction of the two-pot system has brought much-needed relief to workers facing financial difficulties, but it has also exposed systemic failures in employer compliance that could leave thousands of employees without access to their rightful savings.
As more workers take advantage of the system, it’s clear that increased scrutiny on employers and swift action by pension fund administrators will be essential in ensuring the success of South Africa’s two-pot retirement scheme.
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