Thousands of employers have failed to make their obligatory pension fund contributions amounting to a total of R5.2bn for employees, and the Financial Sector Conduct Authority (FSCA) has published the names of some of the culprits.
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, which came into effect on September 1.
Pension fund contributions are deducted from employees’ salaries and withholding them could amount to theft or fraud.
The FSCA departmental head of fund governance and trustee conduct Zareena Camroodien said the total amount of pension fund contributions outstanding was about R5.2bn.
Parliament’s finance committee is concerned about the trends and has called the FSCA and the pension funds adjudicator to brief MPs on Tuesday on the implementation of the two-pot system and the failure of employers to pay pension contributions.
Finance committee chair Joe Maswanganyi said at the end of a joint meeting with the portfolio committee on trade, industry & competition on Friday that there had been a rise in the number of defaulting pension fund contribution payments.
Complaints
“We have received lots of complaints from workers both in the private and public sectors,” he said, adding that the committee was particularly concerned about the nonpayment by municipalities.
The FSCA said in a statement that it had published the names of 2,330 employers that had contravened section 13A of the Pension Funds Act, which prescribes the manner in which the payment of contributions and other benefits should be made to a retirement fund.
The FSCA had the names of 7,770 employers that had contravened the act from end-December 2023 and had decided to publish 2,330 of them. These included 2,003 employers which had outstanding contributions that amounted to more than R50,000 and had been outstanding for a period of more than five months; 200 employers that had outstanding contributions of more than R50,000 but the last contribution date had not been provided; 113 employers whose outstanding contributions were less than R50,000, but where the outstanding late payment interest was more than R50,000 and had been outstanding for more than five months; and 20 employers that had not contributed since the date of participation in the fund.
The balance of 5,440 employers were not included in the publication as they did not meet the stipulated thresholds.
“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,” the FSCA said.
“Withholding these contributions despite deducting the contributions from employees’ salaries, is a serious offence that could amount to theft and, in some cases, fraud.”
The FSCA noted that it oversees regulated entities, which include retirement funds and their boards but not employers participating in retirement funds so it cannot directly address non-compliant employers.
It said this should be remedied by the introduction of the proposed Conduct of Financial Institutions Bill.
Retirement fund boards had taken legal action to recover outstanding contributions as well as applying the bargaining council enforcement process and lodging complaints with the office of the pension funds adjudicator. They had also reported contraventions to the police.
“The FSCA will continue engaging with the National Prosecuting Authority and the Directorate for Priority Crime Investigation to ensure that responsible parties are brought to book. The authority also welcomes the arrests of the officials involved in the nonpayment of contributions in the Kai !Garib, Renosterberg and Kamiesberg municipalities.”
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