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The state’s pension funds watchdog says the introduction of the two-pot system two years ago has contributed to record levels of complaints fielded by the watchdog, which are straining the watchdog’s capacity.
Pension funds adjudicator Paul Mogashoa said the heightened demand for the services of the Office of the Pension Funds Adjudicator (OPFA) underscored the importance of its process optimisation.
“The office received 13,041 new complaints, the highest annual intake recorded since its establishment,” Mogashoa said.
“This represents a 26% increase from the 10,331 complaints received in the previous financial year and surpasses the previous record of 11,399 complaints recorded in 2018-2019. The increase was primarily driven by the continued impact of the two-pot retirement system, enhanced stakeholder management initiatives undertaken by the OPFA, and prevailing weak economic conditions.”
The introduction of the two-pot system as the cost of living rises, fuelled by inflationary pressures and geopolitical tensions, has set the stage for high volumes of inquiries about two-pot balances and even withdrawals to cover emergency expenses.
Mogashoa said despite the significant increase in complaints, the OPFA maintained a disciplined focus on throughput, efficiency and fairness, finalising 11,047 complaints during the year under review. This is the highest number of matters finalised in a single reporting period since the establishment of the office.
“These factors contributed to increased reliance on the OPFA as an accessible and trusted forum for the resolution of retirement fund disputes and highlighted persistent challenges within the retirement funds sector.”
The Financial Services Tribunal received 104 applications for reconsideration of OPFA determinations during the year under review, 63 of which were dismissed, Mogashoa said.
Finance minister Enoch Godongwana called the OPFA an integral component of the financial consumer protection framework and praised the watchdog for its efficiency in the face of the flood of work.
The OPFA demonstrated remarkable resilience and operational effectiveness, finalising 91% of cases within six months
— Enoch Gogongwana
The increase in complaints to the agency “reflects both heightened public awareness of the OPFA’s services and increased retirement fund activity arising from withdrawals under the two-pot system during a period of continued economic pressure”, the minister said.
“Despite these significant volumes, the OPFA demonstrated remarkable resilience and operational effectiveness, finalising 91% of cases within six months.”
Nashalin Portrag, head of FundsAtWork and distribution at Momentum Corporate, said Momentum’s data shows that among members who qualify to withdraw under the two-pot scheme, 52% had done so.
“But the reasons are not what you might expect. People aren’t withdrawing to pay for holidays or investments but to survive: 44% of withdrawals go toward paying off debt, 23% to cover everyday living expenses, and 20% toward education.”
Portrag said that when the scheme began many expected it would be used in an even split between paying off debt and building savings, but rising interest rates, inflation and debt repayments had pushed people toward using their two-pot savings simply to stay afloat.
“For the established middle class in particular, salary increases are not keeping up with debt and rising costs. Once other options such as credit cards, loans, and family support run out, retirement savings become the last resort.”
He said the data showed a gap between what people had intended to do and what was actually happening due to necessity. Last year, 74% of Momentum members said they would access their savings component only in a real emergency. By this year, however, only 48% of eligible members had not made a withdrawal.
“Age and life stage also matter. Mid-career millennials, for example, are most likely to make repeat withdrawals as they juggle home loans, debt, and raising children. Gen X members tend to withdraw once and stop,” Portrag said.
“Baby-boomers are the most likely to leave their savings alone, helped by greater financial stability and being closer to retirement. Encouragingly, of those who withdrew, 45% only did so once and 10% say they won’t withdraw again.”
Business Times