EDITORIAL: Action needed in policing pension contributions

Imagine finding out that the pension fund contribution that you have paid out of your salary for months and months was not transferred to your pension fund but was instead retained by your employer, and when you recently wanted to make a two-pot withdrawal you found out there wasn’t anything, or not the amount expected, in the kitty. 

As finance committee chair Joe Maswanganyi said in parliament last week, it is tantamount to a “death sentence”. 

But the problem is widespread. From end-December 2023, 7,770 employers had contravened the Pension Funds Act in this way, with the total in arrear contributions not paid amounting to R5.2bn. This is scandalous and represents a form of theft. 

More stringent ways are needed to enforce compliance and to hold those responsible to account. It is good that the Financial Sector Conduct Authority (FSCA) is naming and shaming some of these employers, but this is not enough. More prominence needs to be given to the names of employers at fault. 

Unfortunately, employers participating in retirement funds do not fall under the entities regulated by the FSCA, so it is powerless to act in any other way. It is hoping the situation will be rectified by the introduction of the Conduct of Financial Institutions Bill.

It is the responsibility of the boards of retirement funds to recover outstanding contributions from employers, but given the huge amount outstanding it is clear they have failed to perform their duties in this respect.