(Bloomberg) -- The failure by South African employers to pay 5.2 billion rand ($288 million) in pension contributions could leave retirees facing poverty and destabilize the retirement ecosystem if it reaches a significant amount, the head of the financial regulator said.
Currently 7,770 employers have failed to make pension contributions deducted from workers’ salaries, including almost 150 local governments, whose arrears are estimated at about 1.4 billion rand, Unathi Kamlana, commissioner at the Financial Sector Conduct Authority, said in a speech Tuesday.
“As pension funds rely on steady contributions to maintain liquidity and fulfill their obligations, they may become strained when contributions are inconsistent or delayed,” Kamlana said. “This in turn could limit their ability to invest in long-term projects, diminishing their role as major institutional investors in the economy,” making the entire retirement system more vulnerable, he said.
Failing to make the contributions also have implications on workers’ retirement savings in a nation where already less than 10% of the population is able to retire comfortably, said Kamlana
To remedy the situation, the regulator is banking on the enactment of the Conduct of Financial Institutions Bill. The law will bring employers who pay retirement contributions under its supervision, allowing it to boost compliance and accountability, Kamlana said.
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