Most employers help retirement fund members to retire better, but South Africa does have numerous cases where retirement fund members have been denied the full benefits to which they are entitled as a result of employers failing to pay contributions to their funds.
Members often only become aware of this when they leave a fund and find their withdrawal benefits are lower than they expected because the full contributions have not been paid.
Many complaints about this are lodged with the Pension Funds Adjudicator and amendments have been made to the Pension Funds Act in an attempt to deal with the issues.
If you are a member of an employer-sponsored fund or umbrella fund, the rules of the fund will state what percentage of your salary should be deducted from your salary each month for your contributions, and the amount your employer will contribute.
The Pension Funds Act obliges your employer to pay these contributions over to the fund within seven calendar days of the end of the month for which the contribution is payable.
If an employer is late paying the contributions to the fund, the fund must calculate interest at an interest rate that is set by the Financial Sector Conduct Authority. This is currently a formula based on the repo rate.
If an employer fails to pay over its contributions and the amounts it has deducted from your salary as contributions, it commits a criminal offence in terms of common law.
Personally liable
In 2014, the Pension Funds Act was amended making directors, members of a close corporation or the governing body of an employer, who are regularly involved in the company’s financial affairs, personally liable for an employer's failure to pay contributions.
The Act obliges funds to ask the employer to provide the name of the director or member who is responsible for ensuring contributions are paid over. If the employer fails to notify the fund in writing, all directors and members of the close corporation or governing body responsible for financial affairs can be held liable for any failure to pay contributions.
The Act provides that the responsible person at an employer can be fined up to R10-million or imprisoned for up to 10 years for failing to pay over contributions.
The Act also makes the principal officer of the fund, or a person authorised by the board of trustees, responsible for monitoring that the contributions are paid to the fund in time.
The principal officer, or the person authorised by the board, must report the employer’s failure to pay over the contributions to the trustees within seven days of receiving this information.
Regulations under the Act state that if the board is given an acceptable reason for the employer’s failure to pay the contributions, the trustees can decide to take no action.
If they have, however, been given no acceptable reason, they must inform members of the non-payment and inform the Financial Sector Conduct Authority (FSCA) of the action they have taken to recover the outstanding amounts.
If the contributions are still outstanding after 90 days, regulations under the Act require the board to report the matter to the Attorney General and to inform the FSCA.
Commercial umbrella funds typically terminate the membership of an employer group when contributions are outstanding for more than a few months.
Lodge a complaint
If you are a member of a fund who finds out your contributions have not been paid to their fund in full, you can complain to the Pension Funds Adjudicator. Read: Where to complain
The adjudicator can order the responsible person at your employer to pay the outstanding contributions and should he or she fail to do so, the determination can be taken to court and assets held personally by the responsible person can be attached in order to recover the amount owed.
Many funds have rules in place to deal with situations like the lockdown during the Covid-19 epidemic when employers struggled to pay contributions because they were not able to operate and/or employees were not able to work.
The FSCA urged employer-sponsored funds to consult with employers and in cases where funds did not have rules in place, to file rule amendments making provision for a suspension, postponement or reduction of contributions and/or a reduction of pensionable service.
Funds were required to inform affected members of employers’ requests to reduce or suspend contributions, and of proposed rule amendments within 30 days of receipt of such requests.
Sources:
https://discover.sabinet.co.za/webx/access/netlaw/24_1956_pension_funds_act.htm#section13A
https://www.fsca.co.za/Regulatory%20Frameworks/Temp/FSCA%20COMMUNICATION%2011%20OF%202020%20(RF).pdf
