Pension Funds Adjudicator calls out Private Security Sector Provident Fund and administrator for negligence

Despite several red flags, the removal of almost the entire board and repeated concerns expressed by the Office of the Pension Funds Adjudicator, the Private Security Sector Provident Fund continues to fail in its duties.

The Office of the Pension Funds Adjudicator has told Daily Maverick that between 1 April 2022 and 31 March 2023, it received 3,771 complaints and finalised 2,388. 

Of the 2,388 finalised complaints, it dismissed only 17 matters and found in favour of the complainants for the rest. As many as 2,477 matters related to errant employers.

At the end of August this year, the Financial Sector Conduct Authority (FSCA) identified more than 3,500 errant employers who had failed to pay over their employees’ retirement fund contributions.

However, what many media failed to note was that most, if not all, the employers listed were members of one retirement fund in particular – the Private Security Sector Provident Fund (PSSPF).

Pension Funds Adjudicator Muvhango Lukhaimane says it is very difficult to make out what is happening at the fund. 

“For some time, the FSCA had placed the fund under statutory management – this has since been lifted and a new board, which includes one of the former statutory managers, and principal officer, Wanda Ndabeni, has been appointed,” she says. 

However, Lukhaimane points out that Ndabeni holds an acting position only, “which means that he is perceived to be beholden to the board, which then compromises his independence and ability to report contraventions by the board as he is required to in terms of the Act”, she says.  

This situation follows an investigation into extensive abuse by the fund’s previous board, which culminated in several members of that board being fined and some being prevented from holding office in the future.

Lukhaimane says the real problem is the administration of the fund. 

The previous board appointed Salt Employee Benefits as the administrator of the fund (through a process that was later found to be flawed and contrary to its own processes despite legal advice that it received to the contrary). 

She says Salt remains unable to administer the fund in line with the prescripts of the Act, some of which are very fundamental and therefore contribute substantially to members’ grievances. 

“In a meeting we had with the fund, they indicated that they are looking for another administrator, but this should not be delayed because the fund is sitting with billions of rands from employers that have not been allocated to members’ records,” she says.

As an example, Lukhaimane says it is not uncommon for her office to receive a complaint and the fund responds that the employer has not paid the contributions, but the employer can show proof of payment and schedules forwarded to the fund to allocate the contributions.

“We are talking about notable periods (sometimes involving hundreds of thousands of rands) and not just a few months. So, while there may be many employers that are not paying contributions, it is difficult to say who and how many because the fund’s records are not up to date, which is the responsibility of its administrator, Salt. 

“And they [Salt] have demonstrated time and again that they are unable to do the basics of what an administrator is supposed to do, and the board is unable to hold them to account,” she says.

In addition to the PSSPF-Salt problems, the industry in general has reported difficulty in laying criminal charges against errant employers apparently due to lack of capacity at the SA Police Service and the National Prosecuting Authority. This is an issue that the FSCA has reportedly been pursuing for some time now.

Daily Maverick attempted to contact Wanda Ndabeni, acting principal officer of the PSSPF, and received no response despite waiting almost a month. We also attempted to contact Salt Employee Benefits, but received no response.

In June, the FSCA revealed that more than 5,000 employers had contravened the Pension Funds Act when it came to paying over retirement fund contributions on behalf of their employees. 

Of these, 28% had contributions outstanding for one month, 24% for two to 12 months, 23% for 13 to 60 months and 25% for five or more years. 

The list of more than 3,500 errant employers that was published reflected only those with outstanding contributions for four months or longer.  

The Pension Funds Act states that employers have seven days after the expiration of the period in respect of which contributions are due, to pay the contributions prescribed in terms of the retirement fund rules to a retirement fund. 

“Failure to pay over contributions as required is not only a contravention of the Pension Funds Act, but leads to prejudice and unfair outcomes for members. 

“While the retirement benefits of the members are compromised due to such contravention by an employer, other benefits such as risk benefits payable to the members (where applicable) are also impacted,” the FSCA says.

For example, if the employer does not pay over contributions for a period of three months, the insurer will repudiate any claim on the basis of outstanding premiums and the dependents, in the case of a death benefit, will not receive a payout.

The FSCA’s preliminary statistics indicate that municipalities and private sector companies have arrear contributions of about R1-billion and R6-billion, respectively. 

“While financial difficulties faced by municipalities and the effects of Covid on the economy are public knowledge, employers still have an obligation to their employees to pay over deducted contributions and employers to the retirement fund as per the PFA [Pension Funds Adjudicator]. 

“It must be noted that the boards of retirement funds have the duty to recover outstanding contributions from employers by making use of the various avenues available to them,” the FSCA says. DM