Local authorities fail to remit pension funds. . . Owe over $167 million despite making monthly deductions

Source: Local authorities fail to remit pension funds. . . Owe over $167 million despite making monthly deductions – Sunday News Feb 19, 2017

Vusumuzi Dube, Municipal Reporter
LOCAL authorities around the country owe the Local Authorities Pension Fund (LAPF) more than $167 million in outstanding contributions and interest amid revelations that the fund has had to deal with a number of litigations with former workers challenging their payouts.

LAPF chief executive officer Mr Charles Mandizvidza has dispatched letters to all local authorities convincing them to make lump sum payments to help solve the financial problems.

The fund revealed that it was failing to meet its obligations, relating to payment of retirement, withdrawal and death benefits claims because of the councils’ failure to make the payment obligations.

“The fund’s cash inflows remain constrained resulting in incapacity to meet obligations on time. This is as a result of subscribing member local authorities failing to remit contributions to the fund. As at 31 October 2016, the fund’s global outstanding contributions and interest thereon amounted to $167 million. We presently have over $45 million in unpaid pension benefits and we do not anticipate any improvement in the short term.

“The fund also has been inundated with summons from the High Court as well as demands from various law firms engaged by disgruntled pensioners and beneficiaries. The situation continues to worsen daily as evidenced by the large number of litigation cases before the courts,” reads part of the letter.

The letter further reveals that LAPF has to — almost on a daily basis — deal with litigations at the courts.

“For example on 15 November 2015, the fund received 43 notices to appear at the courts with a liability of $1,57 million. This extremely worrisome position has prompted the fund’s trustees to seriously review the payment of lump sum pension benefit claims. Whilst the fund appreciates the financial difficulties being faced by member local authorities, attention is drawn to the fund’s failure to meet its obligations.

“To this end the fund’s management committee resolved that member local authorities be requested to pay lump sum pension benefits on behalf of the fund in respect of their ex-employees and beneficiaries utilising current contributions with the balance being remitted to the fund,” reads the circular.

Mr Mandizvidza noted that this arrangement will subsist until the liquidity situation normalises.

According to a Bulawayo City Council report it was revealed that the local authority will have to pay $4,2 million lump sum to its beneficiaries after they noted that there was no other way out as the local authority was owing in terms of monthly remittance.

“The Town Clerk (Mr Christopher Dube) advised that whether or not council was able to meet the expenditure the fact still remained that council was in serious debt over the pensions issue and had an obligation to pay. Pensioners were in a predicament and it was incumbent upon council to take action as appropriate.

“The Chamber Secretary (Mrs Sikhangele Zhou) confirmed that council was indebted to LAPF, which in turn was indebted to the pensioners. However, LAPF’s defence was that councils had not remitted the required funds hence its inability to pay the pensioners. Council had deducted the money from the employees’ salaries but had not remitted the contributions to LAPF when it was its obligation to do so,” reads part of the council report.

In a list provided by LAPF they owe a total of 86 former Bulawayo workers in outstanding pensions with the highest figure pegged at $195 301 being owed to the retired Director of Health Services, Dr Zanele Hwalima.