Two-Pot Retirement System unmasks thousands of defaulting employers

The two-pot regime, which allows pension fund members to access a third of every contribution made into their retirement investments from last September, is expected to shine a spotlight firmly on companies that breach the requirements of the Pension Funds Act.

The Financial Services Conduct Authority (FSCA) has, as of September 25, identified 5,830 employers that are in breach of the section in the Pension Funds Act that mandates companies have seven days to pay over pension fund deductions to the fund.

As a result, Pension Funds Adjudicator Muvhango Lukhaimane expects complaints to rise simply because pension fund members won’t be able to access a third of the investment that should have been paid over.

As of last September, two pots – a vested pot and a savings pot – were created so that people could access pension fund investments, ideally in the case of an emergency. To get the savings pot going, R30 000 from each member’s fund was moved into the savings pot.

Investors can now – once a year – withdraw from the savings pot with no cap, although the minimum amount is R2 000. In addition, the money will only be paid over if all taxes due by the member are paid up.

According to the Reserve Bank of South Africa, the reforms have boosted tax revenue. And the South African Revenue Service (Sars) indicated that, as of 2025, a net amount of R43.42 billion had been paid out under the new regime to 2.4 million South Africans.

However, funds also can’t be withdrawn if they simply aren’t there. 

During the 2024/5 financial year, complaints rose 13% to 10,331, partly due to the two-pot system

Writing in the annual report, Finance Minister Enoch Godongwana says the OPFA received 239 two-pot-related complaints and 2,246 enquiries between September last year and this March.

Lukhaimane tells Personal Finance that complaints are expected to continue to rise because the two-pot retirement system has resulted in members becoming aware that their employers are not paying over their contributions when they want to withdraw.

According to the FSCA, 5,830 employers have contravened section 13A of the Pension Funds Act – the relevant aspect of the law that dictates that employers must pay over contributions by the seventh of the following month. 

This section of the Act also created the position of an authorised person who “must monitor and ensure compliance with section 13A and have a duty to report non-compliances to interested parties as prescribed”.

“The obligation and duty to ensure that the employer makes correct contribution payments and submits the correct contribution schedules is that of the employer,” it says.

Yet, as of the end of March, the FSCA received reports of 15,521 employers in contravention of the relevant section, of which 5,821 employers’ names were “published due to the severity and duration of their arrears,” a recent media statement says.

“This represents a 50% increase in non-compliant employers since the December 31, 2023, publication,” the FSCA says. In total, “arrears are now estimated at R7.23 billion, of which R2.98 billion is attributable to late payment interest,” it says.

The FSCA provided the following breakdown:

• 5671 employers have outstanding contributions exceeding R50,000, which have been overdue for 5 months or more.
• 80 employers have outstanding contributions exceeding R50,000, but the last contribution date has not been provided.
• 79 employers owe less than R50,000 in contributions, but outstanding late payment interest (LPI) exceeds R50,000 and has been overdue for 5 months or more.
• 17 employers who only have LPI outstanding.

The FSCA says it’s “important to note that, while some employers may settle outstanding contributions, they may not fully address the late payment interest levied”. 

In the annual report, the OPFA also highlighted this issue, noting that a failure by companies to comply with the Act when it comes to paying over contributions “remained a prevalent issue, making up 44.34% of all complaints investigated and closed”.

It added that complaints concerning withdrawal benefits constituted 38.79% of all complaints. “Further, the two categories often overlapped, with a complainant only discovering that his or her employer failed to pay contributions at the stage of withdrawing their benefit,” it says in a statement.

Godongwana, writing in the annual report, noted that “the recurrence of these issues and the high number of complaints remain of great concern”.

Another reason for the rise in complaints attributed to the two-pot system was what the OPFA called “teething problems,” such as delays in the administration and processing of withdrawals from the savings component.

In November last year, Sars noted that applications for withdrawals “were declined for a myriad of reasons, ranging from systems failures from the fund management entities to wrong identification number, [and] wrong tax number,” among other issues. In addition, it noted that thousands of directives were declined because of insufficient funds and wrong codes, while many others were cancelled by taxpayers who changed their minds.

Ahead of the two-pot regime coming into play, the OPFA created a two-pot response plan that involved allocating temporary resources to address two-pot queries, conducting staff training, and establishing a stakeholder engagement strategy.

“This proactive approach ensured the efficient handling of queries and complaints,” its annual report says.

PERSONAL FINANCE