Changes to pensions in South Africa in 2023 – what you need to know
An employer must pay benefit contributions to the pension funds to which they participate according to South African legislation, says employment law experts Imraan Mahomed and Tshepiso Rasetlola at legal firm Cliffe Dekker Hofmeyr.
In light of misconduct by employers not paying pension contributions, the Financial Sector Conduct Authority (FSCA) has found it necessary to safeguard the financial interests of employees with a new amendment in store for 20 February 2023 called the ‘Conduct Standard 1 of 22: Requirements Related to the Payment of Pension Fund Contributions’ (Conduct Standard).
There have been several public examples of employers breaching their duties under the Pension Funds Act, said Cliffe Dekker Hofmeyr.
Under section 13A of the Pension Funds Act, contributions must be made as provided in terms of the rules of the employer’s fund.
“These are deducted from an employee’s monthly salary, and it’s a criminal offence for an employer not to pay over these contributions.”
The non-payment of pension fund contributions has been a long-standing issue the Financial Sector Conduct Authority (FSCA) has attempted to address over the years through various initiatives, the latest being the proposed repeal of regulation 33 in terms of section 36 of the Pension Funds Act.
On 22 November 2022, National Treasury published a notice inviting the public to submit comments on the proposed repealing of regulation 33, which would allow for new standards and requirements for the payment of pension fund contributions, said Cliffe Dekker Hofmeyr.
Section 13A of the Pension Funds Act also ensures compliance with the fund’s principal officer or any other person duly authorised by the board of trustees, being required to report the non-payment of contributions by an employer.
Regulation 33 is aimed to be used in conjunction with section 13A of the Pension Funds Act.
The FSCA has, however, uncovered flaws within regulation 33. According to the FSCA, there also needs to be a standardised manner and format for reporting by principal officers and authorised persons insofar as it relates to matters that fall outside the two governing regulations.
” It further identified that boards of trustees outsource their responsibility to recover outstanding contributions from an employer to an attorney or third party, which practice the FSCA has found to be undesirable.”
“This is because it has been found that in many instances, attorneys make use of their trust accounts and would therefore earn interest on the amounts they recovered from an employer on behalf of a fund, whilst the amounts recovered are in possession of the attorney.
“Often, the funds so recovered are not paid over to the fund in a timeous manner, potentially with the objective of maximising interest earned on such funds,” said Cliffe Dekker Hofmeyr.
There were various instances identified where a fund has not provided any instructions to the attorney regarding what action the attorney should take when dealing with employers that refuse to pay outstanding contributions, added the group.
“The lack of instruction and clear agreement on processes between the fund and attorney often results in delays in taking appropriate action to address outstanding contributions.”
“In some instances, actual or potential conflicts of interests and/or exorbitant fee arrangements exist where the recovery function is outsourced to an attorney,” said the legal experts.
The ‘Conduct Standard’ is intended to replace Regulation 33 by providing for the following changes that are not adequately addressed and dealt with in Regulation 33:
- The minimum information to be furnished to a fund by an employer, with regards to payments of contributions made by an employer in terms of section 13A of the PFA;
- Set a standard format in which a fund must inform a participating employer of its duties and obligations under section 13A of the PFA;
- Set out the format in which a request by a fund to an employer, as referred to in section 13A(9) of the PFA, must be made;
- Prescribe the manner and format of reporting and notification by principal officers of pension funds or any other authorised persons and boards of a fund as referred to in section 13A(6) of the Act
- To the board of a fund regarding compliance with, or non-compliance with, the provisions of sections 13A(2)(b) and 13A(3)(a) of the PFA by an employer;
- Set requirements for a board a fund, and participating employers, when the board of a fund outsources the collection of outstanding contributions to attorneys; and the rate of interest payable on arrear contributions.
Information sourced from Business Tech: https://businesstech.co.za/news/lifestyle/654993/changes-to-pensions-in-south-africa-in-2023-what-you-need-to-know/
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