Pension Fund Contribution Arrears Serious Crime Against Humanity

The Standing Committee for Finance in South Africa has condemned employers who deduct pension fund contributions from employees but fail to pay them over to the relevant pension funds, describing it as a serious crime against humanity. This statement came after a briefing by the Pension Funds Adjudicator and the Financial Sector Conduct Authority FSCA on the implementation of the two-pot retirement system and the issue of employers failing to remit pension contributions.

Dr. Joe Maswanganyi, the chairperson of the committee, highlighted the significant number of complaints from employees about pension contributions in arrears. Employers' arrears are said to total R5.2 billion, excluding umbrella funds and late payment interest. Over 7,770 employers are in arrears with payments to 51 pension funds, impacting more than 300,000 employees.

The issue came to light when employees attempting to withdraw funds from the two-pot retirement system found that their contributions had not been paid over by their employers, leaving no money available for withdrawal. Astid Luden, deputy commissioner of the FSCA, revealed that the failure to pay contributions has been an ongoing problem since the mid-2000s, which worsened during the COVID-19 pandemic.

The FSCA supervises 872 active pension funds worth R5.5 trillion in assets, with over 15.4 million members, including 9.6 million active contributors. While arrears make up just 0.2 of pension fund assets, the impact on employees can be severe. Bargaining council pension funds are particularly affected, and Luden emphasized the need for these funds to take strong action against defaulting employers, including charging them with criminal offenses and having the police investigate the matter.

The FSCA has also published a list of employers who have failed to pay over contributions for the past two years. Since the list's publication, about 1,000 employers have rectified their payments.