Business Maverick

RTF PROCESS

Pension fund complaints rise on back of consumer rights awareness and trust in regulators – watchdog

Pension fund complaints rise on back of consumer rights awareness and trust in regulators – watchdog
Pension Funds Adjudicator Muvhango Lukhaimane. (Photo: Gallo Images / City Press / Jaco Marais)

The Pension Funds Adjudicator believes the implementation of the ‘return to fund’ process is bearing fruit, with an increasing number of complaints being settled through dispute resolution between pension funds and members. However, the complaints about the Private Security Sector Provident Fund are still cause for concern.

Increased awareness of consumer rights and confidence in financial regulators has led to an upward trend in complaints to the Office of the Pension Funds Adjudicator, increasing 26% compared with 2020/21 at the height of the pandemic.

Pension Funds Adjudicator Muvhango Lukhaimane says her office received 9,190 complaints during the 2022/23 fiscal year, of which 77% were received via electronic and online channels. A total of 2,559 complaints were carried over from the previous year, and 7,809 complaints were finalised during the reporting period.

The recently implemented “refer to fund” (RTF) process, where the Office of the Pension Funds Adjudicator acts as a facilitator for dispute resolution between funds and complainants, has yielded positive results. A total of 620 complaints were successfully concluded through this process.

“The RTF process, which gives retirement funds an opportunity to resolve a dispute directly with a potential complainant before the complaint is formally registered as such, allows funds to get closer to their members and understand their grievances. This has assisted the OPFA [Office of the Pension Funds Adjudicator] to close a notable number of cases without formal intervention, because funds have grabbed the opportunity to deal with their members directly,” says Naheem Essop, senior legal adviser at the Office of the Pension Funds Adjudicator.

However, he warns that some funds are guilty of failing to take advantage of the RTF process, with what appears to be very little or no attempt at all on their part to resolve complaints directly with their members. 

“Other funds have been habitually uncooperative by failing to provide proper responses to complaints. Failure to provide proper responses to complaints delays the outcome of investigations and thereby erodes trust. The OPFA continues to report these habitual offenders to the Financial Sector Conduct Authority (FSCA) for regulatory intervention,” he says.

As many as 4,368 complaints were resolved through investigations and reasoned determinations, while 1,382 cases were settled. An additional 1,326 complaints were deemed to be outside the jurisdiction of the office (mostly for being out of time), and 733 complaints were resolved through alternative means. Eighty-two percent of the cases were finalised within six months of receipt.

Essop attributes the confidence of the public in retirement funds to the fact that there is a strong sense of accountability for any deviant conduct. “This confidence must be attributed to generally ethical behaviour by financial institutions, a well-respected regulator and a responsive ombud. If these institutions are seen to be inefficient in fulfilling their obligations, the trust in the system is eroded and members are likely to withdraw their savings,” he cautions. 

Primary concerns

Similar to previous years, the primary concerns (84% of total closed complaints) of complainants pertained to withdrawal benefits and employers failing to contribute to pension funds. Lukhaimane notes that almost 50% of these types of complaints arise from members of the Private Security Sector Provident Fund (PSSPF).

“The persistence of these issues and the significant volume of complaints are causes for substantial concern.

“Stakeholders are strongly encouraged to address and rectify this undesirable outcome, stemming from inadequate fund governance, management and administration.

“If left unaddressed, this situation effectively undermines the government’s endeavours to enhance trust, coverage, adequacy and sustainability within the retirement funds system,” she says. 

Following a recent article, Daily Maverick approached Salt Employee Benefits, which administers the PSSPF, directly for comment.

Membership of the PSSPF is compulsory in the private security sector by virtue of a collective agreement, and this fund remained the largest contributor to new complaints. The requirement for compulsory membership in the PSSPF is questionable as several employers fail to comply with the requirement to pay contributions.

“The fund does not appear to be achieving its purpose of providing retirement benefits since the majority of its members do not remain in the fund until retirement age given the nature of the occupation. The PSSPF has also failed to allocate hundreds of millions of rands in contributions paid by employers leading to utter frustration for employers and members. It does not seem as if there is a plan to bring the allocation of contributions up to date, anytime soon,” Lukhaimane says.

Matome Thulare, chairman of Salt Employee Benefits, hotly denies this. 

The challenge of unallocated contributions is primarily due to non-compliant employers who fail to submit accurate information and payment schedules. Salt EB, as the fund’s administrator, is restricted by the information provided by employers and has actively engaged with the FSCA to address this non-compliance. The public listing of errant employers by the FSCA reflects Salt EB’s commitment to transparency and thoroughness in comparison to other administrators,” he told Daily Maverick.

Thulare says proactive interventions to improve employer compliance have included meetings with employers, stakeholder engagements, training webinars and communications to employers. DM

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