KHANGELA BENEFIT TRACING SERVICES

Section 37C of the PFA: The distribution of retirement fund benefits The payout of a deceased member’s death benefits can be time-consuming and laborious, and it can take up to a year before the member’s dependants receive their share of the funds.

Magnus Heystek: The retirement crisis is upon us South Africa's looming retirement crisis: Shattered dreams, financial squeeze, and urgent calls for action ahead.

Can anyone accept this explanation from Zuko at face value? He says the government will try to get pension funds to invest in the economy. Well, they already do invest in projects which they believe will give them a return on their investment in the mid to long term. But is this what the government is looking for? Of course not. They want pension funds to bail out all the loss making state owned entities which, we all know, is (your) pension money going down the drain.

‘No one will force retirement funds to do anything’ The pensions industry won't wake up one day to be told of an arbitrary amendment to Regulation 28, says Zuko Godlimpi – deputy chair of the ANC’s Economic Transformation Committee.

Wave your pension money goodbye

ANC confirms it wants your pension money for Eskom and Transnet The ANC will forge ahead with plans to revive an apartheid-era rule compelling pension funds to plough money into certain government-approved investments – if it retains power in upcoming elections.

It's disgusting. These are contributions that have been deducted from their employees' salaries.

Companies owe pension funds more than R6bn in contributions Private security firms are the worst offenders, putting nearly 250 000 workers at risk.

Post Office has failed to pay into employees’ retirement fund for three years Workers’ contributions have been deducted from their salaries but not paid into fund

MONEY FOR NOTHING: Millions looted while Private Security Sector Provident Fund was ‘run like a spaza shop’ The FSCA upholds its decision to remove board members and impose penalties on them in their personal capacity, saying the ruling has far-reaching implications for trustees and principal officers.

SIU asked to probe disappearance of R300m in pension funds owed to 800 employees ActionSA in Limpopo said it’s become aware of more than 800 employees who belong to the Great North Transport bus company, who have been left without their retirement savings.

The advantages and disadvantages of a preservation fund Preservation funds have some distinctive features which investors should be aware of.

Employer Didn’t Pay Pension Contributions | Soccerladuma What happens when you realise that you may not be set up for a happy retirement because your employer has been making deductions from your salary but not paying over the contributions to the fund administrators?

A former municipal manager who allegedly failed to ensure that contributions deducted from Kai ǃGarib municipal employees were paid to the Consolidated Retirement Fund for Local Government has appeared in court.

A 58-year-old former acting municipal manager of the Kai ǃGarib municipality, J***y Mckay, appeared before the Upington magistrate’s court on Friday to face charges of contravening the Pension Funds Act.

MacKay, the current head of department of public works in Northern Cape, was arrested on Friday morning by the Hawks’ serious commercial crime investigation team based in Upington.

“It is alleged that between September 2021 and March 2022, the accused failed to ensure that contributions deducted from Kai ǃGarib municipal employees were paid to the Consolidated Retirement Fund for Local Government. Total prejudice to the fund exceeds R9m,” Hawks spokesperson Nomthandazo Mnisi said.

She said Mckay was granted R5,000 bail and the case was postponed until November 21 when it will be transferred to the specialised commercial crimes court.

Pension Funds Adjudicator, Muvhango Lukhaimane, says non-payment of pension contributions continues unabated to the detriment of pension fund members.
Pension Funds Adjudicator, Muvhango Lukhaimane, says non-payment of pension contributions continues unabated to the detriment of pension fund members.

Office of the Pension Funds Adjudicator
The Pension Funds Adjudicator released her 2021/22 integrated report on Tuesday.
It shows that complaints about non-payment of retirement contributions by employers jumped from 24% to over 40% in one year.
Recently, high-profile, non-complying organisations in SA included the ANC and the Property Practitioners Regulatory Authority.
Get the biggest business stories emailed to you every weekday or go to the News24 Business front page.

The lifting of Covid-19 restrictions resulted in a busier year for the Pension Funds Adjudicator. Complaints came thick and fast, jumping by 26% in the year ended in March 2022, compared to when South Africa was under lockdown levels 4 and 5.

A key trend worrying the Office of the Pension Funds Adjudicator (OPFA) is an increasing number of complaints are about employers not paying their workers' pension contributions to the retirement funds as they are supposed to.

"This is of great concern to the OPFA as fund non-compliance, and section 13A matters have been a consistent feature over the years and continue unabated to the detriment of pension fund members," said the Pension Funds Adjudicator, Muvhango Lukhaimane.

The OPFA received 8 858 new complaints between 1 April 2021 and 31 March 2022, over and above the 2 109 cases it carried over from the previous financial year. It closed 8 382 of those.

Although the number of complaints was still lower than pre-pandemic levels, the proportion of those relating to non-payment of retirement contributions is increasing. Those made up 40% of complaints received by the OPFA in 2021/22, coming second to grievances about withdrawal benefits.

Contribution-related complaints have increased to 40.55% from 24% in the 2020/21 financial year. Contributing to this is the fact that some retirement funds are not adequately discharging their obligation to ensure the collection of these contributions.

Section 13A of the Pension Funds Act stipulates that employers must pay contributions to the pension funds in which they participate. Yet there have been many high-profile cases in SA where parties responsible for making these payments on behalf of members failed to do so.

These include the governing party and the suspended Property Practitioners Regulatory Authority's (PPRA) CEO, Mamodupi Mohlala. The authority's investigation found that she contravened pension laws by failing to make contributions to the PPRA's retirement fund and appointed people irregularly. She was also blamed for irregular, fruitless and wasteful expenditure.

The Act states that when an employer fails to pay these contributions on the due date, they should be liable for late payment interest. It also makes non-compliance an offence, with sanctions varying from fines not exceeding R10 million to imprisonment for up to 10 years.

The OPFA said while it was understandable that employers faced financial challenges in the recent past, it should not be acceptable that pension fund members must bear the brunt. The consequences are dire for members, who usually find out when they try to claim that their employers were not paying their retirement contributions.

In one example cited in the Pension Fund Adjudicator's annual report, an employee of the Maluti A Phofung Municipality died in September 2018, a month before his employer's group life insurance scheme was reactivated. It was deactivated in October 2017 following the municipality's failure to pay contributions to the retirement fund, which provided group risk benefits, including death cover.

After resuming the payment of current and area contributions, the municipality reactivated the risk benefits a year later and a little too late. The group life assurance benefit only became effective on 1 October 2018, a month after the member died.

The member's son submitted a complaint to the OPFA in August 2021 about the absence of risk benefits at the time of his death. But the adjudicator could not hold the retirement fund accountable. The risk portion had been removed from the deceased's benefits at the time of his death. So, the family didn't get any death benefits.

R81 billion of unclaimed benefits: is some of it yours? It’s hard to believe that there is a huge pot of money – around R81 billion – that South Africans could be using to improve their lives, that they don’t know they are owed.

FSCA search and seizure at Akani Retirement Fund AdministratorsWatchdog launches probe on the group, saying it will share information once its investigation is completed.
The FSCA says it received complaints 'which contained sufficient information to create a reasonable suspicion that financial sector laws may have been contravened by Akani'.
The Financial Sector Conduct Authority (FSCA) has conducted a search and seizure operation at the property of financial services company, Akani Retirement Fund Administrators.
The authority indicated in a statement issued on Thursday, that the order, carried out in line with the Financial Sector Regulation (FSR) Act of 2017, was granted by the Deputy Judge President of the Gauteng Division (Pretoria) of the High Court, Opulent Molopa.
"The purpose of the operation was to gather facts and information to assist the authority in its current investigation into the entity, after the FSCA received complaints which contained sufficient information to create a reasonable suspicion that financial sector laws may have been contravened by Akani,” says the financial watchdog.
Unathi Kamlana, the FSCA’s commissioner, says the body’s overriding objective is to protect financial customers, including members of retirement funds, who represent all members of society demographically.
"This operation is in keeping with that duty and is in the interest of clean administration in the retirement funds sector,” adds the commissioner.
The FSCA says it is not at liberty to disclose the details of the investigation according to statutory provisions of section 251 of the FSR Act.
"This information will be shared once the outcomes are carefully considered, and due process is followed with regard to any subsequent decisions or actions, as required by the relevant laws.”
Akani is yet to comment on the FSCA’s search and seizure move.

https://www.news24.com/fin24/companies/government-pension-fund-to-reduce-r70bn-allocation-to-the-pic-20211124

Government pension fund to reduce R70bn allocation to the PIC | Fin24 The Government Employee's Pension Fund expects to cut the amount of money it allocates to a division of the Public Investment Corporation, that has to date helped it fulfill some of its environment, social and governance aspirations.

Here we go again, another cash cow for the government to get their grubby paws on.

FSCA proposes Treasury sets up centralised fund for unclaimed pension money https://ewn.co.za/2021/10/13/fsca-proposes-treasury-sets-up-centralised-fund-for-unclaimed-pension-money

FSCA proposes Treasury sets up centralised fund for unclaimed pension money The Financial Sector Conduct Authority (FSCA) was has been sitting with over R44 billion worth of unclaimed pension funds owed to 2.5 million South Africans.

Most complaints lodged with the Pension Funds Adjudicator (PFA) over the past year were related to delays in the payment of withdrawal benefits.

The office of the PFA released its annual report for 2020/2021 on Tuesday in which it detailed complaints received during this period.

“Withdrawal benefits remained the highest category of complaints, at 52.93% of the 7,014 complaints received ... in the last financial year.”

According to the office, complaints relating to the nonpayment of retirement fund contributions (section 13A compliance) came in second at 23.87%.

“Both withdrawal benefit and section 13A complaints involve complainants experiencing delays in payment of withdrawal benefits, either because proper documents have not been submitted, or more commonly, a partial payment has been made/no payment has been made at all, owing to nonpayment of contributions by the employer or the failure to register the complainant as a member of the fund in the first place, while deducting contributions from their monthly salary.”

The Private Security Sector Provident Fund (PSSPF) remained the biggest contributor to new complaints.

But under statutory management and having increased its complaints management capacity, the PSSPF’s turnaround times had somewhat improved, said the office.

The creation of a new preservation unclaimed benefit fund is an excellent idea but should not be run by the government. They have already looted the Government Pension Fund of billions to fund failed state owned enterprises as well as any other money that lands in their laps and they should not get their sticky fingers on this money. It belongs to those who saved.

R45 billion in pension savings have not been claimed - a new central fund may now be created | Fin24 The FSCA says retirement fund administrators sat with R44.9 billion of unclaimed benefits at the end of 2019. It thinks about 40% of that may never be claimed.

If you ever experience problems being paid out your unclaimed benefit always contact the Adjudicator.

Jul 8, 2021

The Pension Funds Adjudicator, Muvhango Lukhaimane, has ordered a Retirement Fund to pay out a man's withdrawal benefit to which he became entitled in 2013.

The reason provided by the fund for not paying the benefit was that the withdrawal form had not been signed by the man’s employer.

In a complaint to the adjudicator's office, Mr C stated that he completed the withdrawal claim form in 2017. However, the employer refused to sign the form. He further stated that he completed another withdrawal claim form provided to him by the fund in January 2021, to no avail.

The fund stated that when it received the complaint, it was not in possession of Mr C's withdrawal claim form. It said it contacted the employer and informed it to urgently submit the form. However, it is yet to receive a response.

The fund said it has not received a specific reason from the employer for refusing to sign Mr C’s withdrawal benefit. However, it said that fraud had occurred in the department managed by Mr C and that the employer wanted to recover the loss it incurred from his withdrawal benefit.

The adjudicator found that the facts indicated that the fund did not receive any instructions from the employer to withhold the withdrawal benefit and Mr C was not made aware of the fraud allegations levelled against him. The employer did not even lodge a criminal case against Mr C or advance any case that warranted the withholding of his benefit.

The employer’s submissions were found to be without any merit. The adjudicator said almost eight years had passed since Mr C left his employer and this was a clear abuse of process by the employer.

The adjudicator's office says: "The determination comes at a time in the retirement funds industry where the issue pertaining to the withholding of withdrawal benefits at the behest of the employer has sparked debate. Several adjudicator findings as well as that of the Financial Services Tribunal have found that in order to prevent abuse of the process by the employer, funds must act with care and consider representations by the member about why the benefit should not be withheld. The current determination is a prime example of how this process can be abused."

The adjudicator ordered Mr C to provide the fund with all documents necessary for his benefit to be paid and ordered the fund to make payment thereafter of the benefit together with interest.

Our reply: Keep it overseas in any major international currency. Don't convert it to Rands.

Moneyweb

QUESTION: Should I leave my money in an overseas pension fund or transfer it to SA?

I am currently working abroad and contribute to a pension fund. What would be the best thing to do when I return to SA? Should I leave the money in the overseas pension fund, or transfer it to SA? If I leave it overseas, how will I be taxed on it? I am already declaring the income to Sars.

Thank you for posing this very interesting question which is relevant to many Moneyweb readers in this modern and very fluid global business environment we find ourselves in.

As always when responding to these types of questions we must begin with the comment that without an in-depth consultation with you it is quite difficult to provide you with the correct and most appropriate advice.

In these matters, it is important for you or anybody else in this position to consult with an independent, licensed financial planner and in this case perhaps a joint consultation with a financial planner and a tax practitioner should be considered.

Now, let’s try and answer your question

You begin by saying that you are working abroad and that you are contributing to a pension fund, you then continue to ask that should you leave, if this capital should be left in the overseas pension fund or transfer it to South Africa?

It is quite difficult to provide an accurate response to you without knowing your age and in what jurisdiction you are working.

That said, our first instinct is always to advise that when a person changes their employer one should always consider moving their retirement capital (in the most tax-efficient way possible) out of their employer’s pension fund, as you would be constrained by the rules of that particular fund and some of these rules may not suit your requirements as an ex-employee.

Our second instinct is to try and leave the capital offshore invested in a global market currency, such as the US dollar, British pound or euro.

We have to remember that the rand has depreciated steadily over the last many years (I remember visiting the US in 1998 and the rand was at that time around R5 to the US dollar; we are now trading at over R14 to the US dollar) and by having capital invested offshore in foreign currency the investor will enjoy not only the benefit of being invested globally but in all probability be getting the added growth in investment value as the rand depreciates further against the hard currencies.

Lastly, in the global markets the sheer selection of investment options and funds that are available to the investor is much, much greater than those available to the investors who are solely focused on the South African investment product market.

However, it is also our experience that in many cases those investors who have benefits in pension funds domiciled outside of South Africa where they contributed to these pension funds when they were working abroad are often unhappy with their pension fund’s performance and the fees charged on the management of their benefits within this pension fund.

Personally, when consulting with clients who have offshore pension fund benefits, I often realise just how far ahead the South African investment and retirement planning industry is compared to our peers abroad. This is a moment when I am a proud South African.

Now in terms of the most tax-efficient way of transferring your pension benefits to a provider outside of your pension fund when you change your employer or when you retire, this would depend on where the pension fund is domiciled and which country you are working in.

You do state in your question that you have been declaring this income to the South African Revenue Service (Sars). You do not mention whether you are being taxed on this income in South Africa or not. This would have a material effect on how the capital in the pension fund would be viewed from a tax point of view.

We would recommend that you contact the pension fund administrator and determine whether the benefit can be transferred out of the pension fund when you retire/resign at some point in the future.

You should also determine whether you have an Additional Voluntary Contribution (AVC) because in many jurisdictions the capital value in the AVC you are able to transfer out of the fund tax-free at resignation/retirement.

If this is the case then I would recommend that this portion remain invested offshore outside of the pension fund structure when you leave your current employer.

For the balance in the pension fund, I would consider having it transferred to a Self-Invested Personal Pension (SIPP) if you are working in the United Kingdom. A SIPP is specifically designed for individuals who are resident outside the UK. A SIPP is a pension ‘wrapper’ that holds investments until the member retires and is ready to start drawing a retirement income. A SIPP is available to both UK and non-UK residents.

Again, I would urge you to discuss this matter with a qualified and independent financial planner who has access to expert tax specialists as both of these professionals need to understand cross-border retirement products, investment markets and the tax implications of your very particular situation.

As 2021 unfolds, the repercussions of Covid-19 in 2020 continue to play out. One is the retirement funding crisis SA faces.

The Sanlam Benchmark Survey released this week reveals the impact of Covid-19 on the retirement industry, with 27% of stand-alone retirement funds and 41% of umbrella funds’ employers reflecting suspended retirement fund contributions last year.

On average, the suspension was for 4.5 months, but two funds indicated they had suspended contributions for a year or more. Of union funds, 70% indicated that retirement contributions had been suspended for an average of five months.

Kanyisa Mkhize, chief executive officer at Sanlam Corporate, says the pandemic has been a setback for SA retirement fund members and retirees.

“The ultimate financial effect of Covid-19 was the reduced contribution level… The industry also recorded an increase in the number of employees cashing in a significant proportion of their withdrawal benefits.

“Tragically, 7% of stand-alone funds are in the process of liquidation, and no less than 40% of funds and employers say their staff or members experienced a reduction in pay; 27% of stand-alone funds and 31% participating employers cited retrenchment at the workplace,” she says.

Since the implementation of default regulations, funds noticed an increase in the use of retirement benefit counselling: 69% of stand-alone funds indicated they had made greater use of retirement benefit counselling.

Sanlam Corporate’s Avishal Seeth says this was demonstrated in the Sanlam Umbrella fund, where one of the main drivers of the increasing preservation rate was believed to have been proactive retirement benefits counselling. But this was not widespread. Since the introduction of the default regulations in 2019, stand-alone funds providing advice at retirement have increased by 38%. Yet Rigitté van Zyl, chief client officer at Sanlam Corporate, says there was a perceived lack of improvement in member behaviour on preservation and annuitisation since then, with 57% of stand-alone funds saying “that they have not seen an improvement in member preservation. Some of the main reasons cited include members wanting access to their cash, inadequate communication, and the deterioration in economic conditions in South Africa”.

Danie van Zyl, head of smoothed bonus centre of excellence at Sanlam Corporate Investments, says the average employer contribution, as a percentage of salary, was 10.84% – the highest since 2015. “Six percent of funds reported that the employer does not make any contribution to retirement funding. In all likelihood, these employers remunerate staff on a cost-to-company basis and all contributions to retirement are viewed as employee contributions. The average employee contribution rate remained steady at 6.62% of salary,” he says.

Darryl Moodley, head of tailored investments at Sanlam Corporate Investments, pointed out that SA will have an estimated R1.7-trillion infrastructure funding shortfall over the next 10 to 15 years.

“This infrastructure funding gap presents a tremendous opportunity for long-term investors — such as retirement funds — to step in to fill the void. Long-term infrastructure assets could provide retirement funds with a perfect long-term hedge as well as offer attractive risk-adjusted returns if managed well,” he says.

The Sanlam survey shows that stand-alone retirement funds indicated they would invest on average 6.6% of their fund assets in infrastructure, with participating employers of umbrella funds indicating an allocation of about 4.7%.

“While this may appear to be a fairly small allocation, considering that retirement funds consist of around R4.5-trillion in assets, it translates into almost R300-billion in direct infrastructure investments, which is fairly substantial,” Moodley says.

Malusi Ndlovu, director of large enterprises at Old Mutual, says investing in infrastructure offers decent diversification, particularly in the context of the comparatively small local equity markets. “This is because infrastructure assets are less volatile than equities and show a lack of correlation with traditional assets like property.”

The Global Pension Index (GPI) ranks the retirement income systems in 39 countries. SA came 27th.

Saleem Sonday, head of group savings and investments at Allan Gray, attributes this to a lack of preservation and inability to retain retirement contributions within the system.

David Knox, lead author of the Mercer CFA Institute GPI, touched on four areas that could improve a country’s performance on the GPI:

Broadening the retirement system coverage to include the self-employed and workers in the gig economy.

Increasing the government pension or retirement age. There is a fine balance between pre- and post-retirement populations. Managing this differently could mean fewer retirees and more workers.

Reducing leakage from the retirement funding process.

Reducing fees system-wide.

These pillars tie in with Van Zyl’s observation that the foundation of a financially healthy retiree remains: saving enough through adequate contribution levels; selecting the appropriate portfolio; preserving; considering wider needs; and getting the right guidance or advice.

In March 2021, the National Treasury published its draft amendments to Regulation 28 of the Pension Funds Act for public comment.

The proposed amendments aim to make it easier for retirement funds to increase investment in infrastructure in South Africa. However, there are still questions around whether funds will actually want to put their money into these projects, a new survey from Sanlam shows.

The 40th annual Sanlam benchmark 2021 survey found that standalone retirement funds anticipate investing 6.6% of their assets, on average, in infrastructure.

This figure was just 4.7% for umbrella funds. With the current infrastructure funding gap sitting at an estimated R1.7 trillion over the next 10 to 15 years, the question is, are these allocations enough to make a real impact?

“While 6.6% may appear to be a relatively small allocation, we must consider that retirement funds hold R4.5 trillion in assets, this translates to almost R300 billion in direct infrastructure investments which is fairly substantial – but unfortunately still well short of plugging the R1.7 trillion funding gap,” said Darryl Moodley, head of tailored investments at Sanlam Corporate Investments.

Moodley said that there are numerous reasons why funds might consider shifting to investments that can provide superior returns while addressing the social challenges and megatrends of the future.

One of the reasons is that the number of companies available on listed markets is shrinking, both locally and globally, and this means that the opportunity set for retirement funds to invest in listed assets continues to diminish.

Adding to this, the property sector – a favoured asset class for retirement funds – has come under significant pressure as a result of the global pandemic.

“Over the last 20 to 30 years South Africa has not invested enough in infrastructure to keep up with the demands of an emerging economy.

“And unlike investing in listed stocks or bonds, the amazing characteristic about infrastructure investments is the opportunity to build something tangible, it’s about procuring land, sourcing materials, and most importantly, job creation. Investing in infrastructure really is at the core of improving society’s productive capacity and espousing confidence.”

Historically, retirement funds have been reticent to invest in infrastructure mainly due to its seemingly complex nature.

The asset class is largely illiquid and unlisted. The large quantum and long-term nature of the contracts – with the government often a central role player – make these investments complicated to structure and they have limited flexibility post-investment.

But Moodley said that with the proposed changes to Regulation 28 of the Pension Funds Act, more visibility has been generated around this asset class and trustees need to engage deeply in incorporating infrastructure assets into fund portfolios.

“The general philosophy has been, ‘If you don’t understand it, don’t invest in it,’ and yes, investment in infrastructure requires higher levels of skill, due diligence and governance – but it can have significant rewards, especially to early investors in developmental projects, where brand new infrastructure is being developed.”

He said that government and regulators need to create a conducive regulatory environment with policy certainty to ensure that the millions being poured into infrastructure will be into productive assets in high impact sectors of the economy, and not simply white elephants.

"THIS IS WHY KHANGELA IS IN BUSINESS"

The retirement age in South Africa is 65, which means that many people have spent an average of 47 years working hard and are then entitled to their pension benefit funds.

According to the FSCA, almost 4.8 million South Africans have not yet claimed their pension savings, worth almost R42 billion. This amount of money has the potential to change and impact the lives of many and contribute to the financial freedom of communities.

Speaking during a Money Smart Week South Africa 2021 event last week, Project lead of Unclaimed Benefits at Liberty, Kabelo van de Merwe, described unclaimed benefits as any money from a retirement fund that is not claimed for a period of 24 months from the time it is due for payment.

The lack of knowledge and education has resulted in many citizens not being aware that they must make the necessary claims for their retirement savings.

Whether the citizen has recently retired, left employment or is a dependent of someone deceased who was a contributor to a pension fund, it is important to follow the correct channels and to be aware of scams and fraudulent individuals who may claim to assist them with receiving their funds.

The Financial Services Conduct Authority (FSCA) offers to help all South African citizens with their claims at no cost, with beneficiaries and recipients having access the FSCA website and portal to source all the information about possible claims and the correct process to follow. From there, they can contact the retirement fund processors should there be a claim to process.

Once the beneficiary has received the claim form, they will need to complete the details of both who the main member of the fund is as well as person’s relationship to the person they are claiming for. To do this, a tax number is required, as well as proof of identity and a proof of residence. The required documents are used to validate that the money is indeed going to the right person.

Additional procedures are followed by SARS to ensure that the correct tax amounts are deducted whether the beneficiary chooses to transfer the money to a different retirement fund, or if they choose to receive a cash payout.

It is vital that all citizens always check their pay slips to learn about the total amount being deducted to contribute to a retirement fund. It is also important for the employee to keep their information updated with their employer, which includes contact details and residential information.

Citizens are also encouraged to communicate with their families and ensure that they are informed about the money being invested and saved for their retirement.

This is one of the many topics addressed last week during Money Smart Week South Africa, a campaign aimed at motivating and empowering South Africans to become better educated about their pensions.

Home - Streams - MSWSA MSWSA is a public awareness campaign that enhances financial literacy by taking financial education to the people