Errant pension funds and administrators must fall in line with the rules and adhere to good governance, says Finance Minister Tito Mboweni.
In a foreword to the 2018/19 annual report of the Office of the Pension Funds Adjudicator (OPFA), Mboweni said market conduct remained a burning issue as funds and administrators continued to grapple with issues such as the non-payment of contributions and the late payment and non-payment of benefits.
He said data collected from complaints must be used by the Financial Sector Conduct Authority (FSCA) to ensure that the performance of all role-players improves to embrace compliance and good governance.
“From the government side, efforts will be made to ensure that all reforms implemented are for the benefit of members and continue to develop the South African retirement funds’ sector in an orderly manner, including supporting growth, employment and the eradication of poverty,” Mboweni said.
FSCA commissioner Abel Sithole said for the first time since the establishment of the OPFA 21 years ago, more than 10000 complaints were finalised within a financial year. He said this was due to the accessibility of the OPFA to pension fund members and the efficiency of its processes.
In the year under review, the OPFA finalised 10289 complaints - 17 percent higher than the previous year - and 98 percent of complaints were resolved within nine months.
“Notwithstanding the OPFA’s performance, the unprecedented increase in the number of complaints is of concern and requires our undivided attention.
“There has been increased engagement with funds, fund administrators and the regulator to find ways of collaborating to address existing challenges such as non-compliance on payment of contributions and on death benefit lump sum payments, delays in the payments of benefits to beneficiaries, lack of adequate documentation and records management, and poor-quality/delayed responses by funds to the OPFA.
All these challenges, particularly in the current economic conditions, have a direct impact on pension fund members’ welfare, and at times, right to human dignity.
“A welcome development is that there has been an increase in the number of settlements, especially in matters where there were no outstanding contributions.
“Some funds were able to pay the benefit complained of to the complainant even before the finalisation of the complaint. This level of initiation and co-operation by funds motivates the OPFA and fuels it to continue engaging the industry at large and tell the good stories,” Sithole said.
Pension Funds Adjudicator Muvhango Lukhaimane said complaints to the tribunal had increased steadily to a record number, thus affecting turnaround times.
In the year under review, she said 11399 new complaints were received, 16.38percent more than last year.
“It is unfortunate that, with an office that is more than 20 years old, complaints continue to increase.
“Most disturbing is the fact that the bulk of the complaints have to do with non-payment of contributions and death benefits.”
Lukhaimane said these regulatory and compliance matters should best be tackled by the FSCA.
“For an industry that prides itself as world class, with relative maturity, this is a grave indictment on our commitment to act in the best interest of members and acting in the spirit of Treating Customers Fairly.”
She said in many respects non-compliance was concentrated in the large funds - in other words, umbrella funds, sectoral determination funds and industry funds. The non-compliance had to do with failure to collect the necessary contributions in terms of section 13A of the Pension Funds Act and failure to attempt to implement any enforcement measures in terms of section 13A of the Act against a non-compliant employer or responsible persons.
“The levels of non-compliance in these large funds put to question the policy considerations to consolidate funds as it is apparent that the more removed a fund and its administrators are from the ordinary member and employer, the less compliance there is to basic regulatory requirements.”
Lukhaimane said the municipal sector has been a serial offender with non-payment of contributions. A number of municipalities in the Free State and North West were unable to pay contributions to funds, thereby putting members’ risk benefits at risk for extended periods of time.
“This led to the OPFA granting determinations to allow for enforcement by the sheriff that should include the attachment of municipal property to satisfy the debt.
“All in all, not much improvement occurred in the large funds that have been specifically mentioned in prior years as being non-compliant. While the FSCA appointed statutory managers for the Private Security Sector Provident Fund, the backlog experienced with responses to complaints and the conflicting information from its administrators, Salt Employee Benefits, meant the OPFA was often unable to finalise complaints timeously,” said Lukhaimane.