Thousands of employers in South Africa not paying pensions – R5 billion lost and counting
Over R5 billion worth of obligatory pension fund contributions have not been met from thousands of employers.
This was revealed after the Financial Sector Conduct Authority (FSCA) published the names of some pension funds and employers with arrear contributions.
The communication provides the names of 2,330 employers that have contravened the Pension Funds Act (PFA), which prescribes the manner in which the payment of contributions and other benefits should be made to a retirement fund.
The FSCA said that it had received a total of 7,770 reports of employers that contravened section 13A of the PFA (as at 31 December 2023) from retirement funds supervised by the FSCA.
Of this, it was found that:
- 2,003 employers who have outstanding contributions that are more than R50,000 and have been outstanding for a period of more than 5 months;
- 200 employers who have outstanding contributions that are more than R50,000 but the last contribution date has not been provided;
- 113 employer’s whose outstanding contributions are less than R50,000, but the outstanding LPI is more than R50 000 and has been outstanding for more than 5 months; and
- 20 employers that have not contributed since date of participation in the retirement fund.
The balance of the 5,440 employers have not been included in the publication as they do not meet the thresholds set out above.
“The failure of employers to pay retirement fund contributions has severe consequences for members, affecting their withdrawal benefits, as we have seen with the introduction of the Two- Pot System, investment returns, and applicable risk benefits,” said the FSCA.
“Withholding these contributions despite deducting the contributions from employees’ salaries, is a serious offense that could amount to theft and, in some cases, fraud,” added the authority.
The nonpayment of the contributions, particularly by municipalities, recently became apparent to employees who wanted to withdraw money from their pension funds under the two-pot system.
Over 3,000 companies were exposed when workers, allowed to access part of their pension, discovered that no funds were available.
Some of these employers have not have contributed to their workers pension funds for as long as 20 years.
The FSCA regulates entities like retirement funds and their boards, but employers participating in retirement funds are not considered regulated entities under the PFA or the FSR Act, limiting the FSCA’s ability to directly address non-compliant employers.
The FSCA recommmended that this should be remedied by the introduction of the Conduct of Financial Institutions Bill (CoFI).
Retirement fund boards have reported that the following actions, amongst others, have been taken in an effort to recover outstanding contributions:
- Legal action;
- Bargaining council enforcement process;
- Lodged complaints with the Office of the Pension Funds Adjudicator; and
- Reported contraventions to the South African Police Service.
The FSCA said that it will continue engaging with the National Prosecution Authority and the Directorate for Priority Crime Investigate to ensure that responsible parties are brought to book.
“The Authority also welcomes the arrests of the officials involved in the non-payment of contributions in the Kai !Garib, Renosterberg and Kamiesberg municipalities,” said the FSCA.
Members affected by employer non-compliance are urged to engage with their employers and retirement funds directly.
If these efforts are unsuccessful, members may lodge a complaint with the Office of the Pension Funds Adjudicator.
The publication of the full list of those found with arrear contributions is available on the FSCA website.
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