Statutory body the Office of the Pension Funds Adjudicator (PFA) recorded a 13% increase in the number of new complaints during the 2024/5 financial year to 10 331, with 10 100 resolved.

Noncompliance with Section 13A of the Pension Funds Act, which imposes a statutory obligation on employers to pay contributions to funds, remained a prevalent issue and constituted 44.34% of all complaints investigated and closed.

Complaints concerning withdrawal benefits constituted 38.79% of all complaints. However, the two categories often overlapped, with a complainant discovering that his or her employer failed to pay contributions at the stage of withdrawing her or his benefit, says outgoing PFA Muvhango Lukhaimane.

Pension funds received a significant number of two-pot withdrawal applications from members. However, there were processing delays, as some funds underestimated the uptake, while some could not pay the claims as employers owed arrear contributions.

The PFA received 239 two-pot related complaints from September 2024 to March this year, she says.

The two-pot system came into effect from September 1, 2024, and enables members of retirement funds to access money from their savings component without leaving employment.

“While the implementation of the two-pot system has been successful, a further rise in complaints related to two-pot withdrawals is anticipated in the 2025/26 financial year, which prompted the PFA to allocate additional resources and prioritise proactive stakeholder engagement,” Lukhaimane says.

Further, Finance Minister Enoch Godongwana says the recurrence of these issues of contribution arrears and the high number of complaints remain of great concern.

“Stakeholders are urged to remediate this undesirable result of poor fund governance, management and administration.

“[The recurrence of these issues] undermines the government’s efforts to reduce poverty, tackle the high cost of living and build a capable, ethical and developmental State,” he says.

The Private Security Sector Provident Fund (PSSPF), in particular, added to the surge in new complaints. Private security companies are obliged to participate in the PSSPF. Not all employers in the private security sector who deduct retirement fund contributions from their eligible employees’ salaries manage their finances properly, says Lukhaimane.

Additionally, the PSSPF does not appear to have a proper monitoring system in place to detect non-payment of contributions by employers and has also consistently failed to act against defaulting employers, she warns.

Meanwhile, the Financial Services Tribunal (FST) was established as a fee-free regulatory entity for aggrieved people that, among other functions, exists to reconsider the PFA’s determinations, at little to no cost relative to the expensive and lengthy formal court process.

During the period under review, 87 applications for reconsideration were made by people aggrieved by the PFA decisions. The FST issued 83 decisions and four applications were withdrawn. Of the 83 decisions, 54 were upheld and 27 were remitted for reconsideration, says Lukhaimane.

COFI BILL
The Conduct of Financial Institutions (COFI) Bill is expected to significantly change the legislative environment of financial regulatory tribunals. COFI is part of the broader Twin Peaks regulatory reform, that aims to create a single, unified and consistent legal framework for the market conduct of financial institutions, she notes.

The impending COFI Bill may affect the mandate of the PFA by expanding the definition of complaint to also introduce advice, notes PFA senior legal adviser Nondumiso Ntshangase.

The expansion of the definition of a complaint to include not just disputes or grievances, but also issues arising from financial advice could empower the PFA to investigate and adjudicate cases where poor or misleading advice has led to adverse outcomes for pension fund members, which is an area that previously may have fallen outside its jurisdiction, says deputy PFA Naheem Essop.

Additionally, the COFI Bill also proposes that the definition of complaint include a requirement to accept oral complaints, says Ntshangase.

This might create uncertainty, as complaints might not be captured correctly, leading potential delays in finalising them. There will also be financial implications, as oral complaints will require independent transcription to ensure accuracy, she says.

Further, the COFI Bill will also further expand the definition of retirement fund to include public sector retirement funds, thereby expanding the PFA’s jurisdiction to address public sector fund complaints, she highlights.

Lukhaimane will exit as PFA at the end of its current financial year, after serving in the role for the past 12 years.

She took over as South Africa’s fifth PFA on July 1, 2013, and developed the tribunal into a formidable dispute resolution body that was known for its efficiency, impartiality, and jurisprudential integrity in adjudicating complex pension-related matters.

Lukhaimane had also served as deputy PFA from June 1, 2012.

The PFA did not state who would take over her responsibilities after she leaves.