28 Retirement Funds In E88 Million Remittance Contributions Arrears

By Ntokozo Nkambule

An exercise undertaken by the Financial Services Regulatory Authority (FSRA) to evaluate the impact of non-remittance of contributions by employers to retirement funds has revealed that twenty-eight (28) Retirement Funds in the country face challenges in relation to remitting contributions and their total arrear contributions amounted to E88 174 279.66.

The FSRA defines a retirement fund as a systematic plan or fund set up for a defined group of persons, for the purpose of providing annuities and or lump sum benefits for its members on their retirement or to the dependents of such members on the death of the members.

The findings are contained in the FSRA’s Quarterly Statistical Bulletin, Q2, 2022. The challenges that have led to these arrears are attributed to the COVID-19 pandemic and financial challenges prior to the pandemic. “Of the 28 retirement funds, 4 retirement funds were affected by the late remittance of government subventions, 12 retirement funds were affected by financial constraints experienced prior to the Covid-19 era, and 12 retirement funds were directly affected by the Covid-19 pandemic” notes the FSRA Bulletin.

Furthermore, the report notes that the private sector and companies with financial challenges tend to deduct on paper, yet fail to remit the contribution to the respective funds.

The Retirement Act of 2005 notes that all contributions due to a retirement fund in respect of its members should be paid to the fund or to the person administering the fund’s assets within 7 days of the expiry of the period for which it was due. The Act or provisions have a shortcoming however, and that is; that they are limited on the basis that they do not impose punitive measures on the part of the employer who fails to remit contributions to the Funds.

However, the FSRA through the Retirement Act amendment bill proposes measures to ensure that the burden of the failure by employers to remit contributions is felt by them and not the employees by requiring that they pay interest on late contributions.

“An employer who fails to remit contributions to a retirement fund within 7 days of the expiry of the period for which it was due shall be liable to pay interest on the contributions at the prevailing interest rate issued by the Central Bank of Eswatini payable to the fund. The amendment bill also seeks to empower the FSRA to impose an administrative penalty on the employer under section 68 of the Financial Services Regulatory Authority Act, 2010.”

In terms of regulatory interventions, the FSRA and the Office of the Ombudsman observes that they have assisted employees in cases where the fund refused to pay their withdrawal benefits, especially when employers failed to register employees with the relevant pension fund but deducted contribution amounts from their salaries.

“The fund was ordered to compute the value of the withdrawal benefit that the employee member would have been entitled to have been a member of the fund and had the employer timeously made the pension contributions due in terms of the rules of the fund and directed the employer to pay the employee the amount computed by the fund. The FSRA has also ordered some employers to register themselves and their employees with the funds” note FSRA in its Bulletin.

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