Two-Pot system drives surge in pension complaints, adjudicator warns of rising trend

The Office of the Pension Funds Adjudicator (OPFA) has reported a sharp rise in pension-related complaints during the 2024/25 financial year, largely linked to the rollout of the new Two-Pot retirement system introduced in September 2024.

According to the OPFA’s latest annual report, released on Sunday, the number of new complaints increased by 13% year-on-year to 10 331, compared to 9 177 in the previous period. Of these, the office managed to resolve 10 100 cases.

The report noted that 239 complaints were directly related to the two-pot system in the first seven months of its implementation. The system allows retirement fund members to access part of their savings without resigning from their jobs — a reform designed to provide financial flexibility to workers.

However, the OPFA said many funds underestimated the volume of withdrawal applications, leading to processing delays. In some cases, funds were unable to pay claims because employers were in arrears with their contribution payments.

“Funds received a significant number of two-pot withdrawal applications from members,” the report stated. “However, there were processing delays as some funds underestimated the uptake, whilst others could not pay claims because employers owed arrear contributions.”

Non-compliance with Section 13A of the Pension Funds Act — which obliges employers to pay over retirement contributions — remains the single largest source of disputes, accounting for 44.3% of all complaints investigated and closed. Complaints related to withdrawal benefits made up 38.8% of cases, with the two categories often overlapping when employees discovered missing contributions during withdrawal attempts.

The Private Security Sector Provident Fund (PSSPF) was cited as a particular area of concern. The report noted that many private security employers deduct contributions from workers’ pay but fail to remit them, while the PSSPF itself lacks effective monitoring and enforcement mechanisms.

“Private security companies are obliged to participate in the PSSPF. Employers in the private security sector who deduct retirement fund contributions from their eligible employees’ salaries, are not able to manage their finances properly,” it said.

“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.”

Muvhango Lukhaimane, the Pension Funds Adjudicator, said the OPFA remained committed to fairness, efficiency, and justice amid ongoing regulatory change.

“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, prompting the OPFA to prioritise resource allocations and proactive stakeholder engagement,” said Lukhaimane.

The report also highlighted the potential impact of the Conduct of Financial Institutions (COFI) Bill, part of government’s Twin Peaks regulatory reform aimed at creating a unified framework for financial sector oversight.

“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.”

Nondumiso Ntshangase, senior legal advisor at the OPFA, said that the impending COFI Bill may affect the mandate of the OPFA by expanding the definition of “complaint” to also introduce “advice”.

Deputy Pension Funds Adjudicator, Naheem Essop, added that this change could empower the office to investigate cases where poor or misleading advice led to financial losses for members — an area previously outside its mandate.

In a message included in the report, Finance Minister Enoch Godongwana expressed concern about the recurring issues of poor governance and non-compliance in the pension industry.

Godongwana also urged stakehoders to remediate this undesirable result of poor fund governance, management, and administration.

“This, in effect, undermines the government’s efforts as outlined in the three priorities of the Government of National Unity to reduce poverty, tackle the high cost of living, and build a capable, ethical, and developmental state,” said Godongwana.

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