South African employers owe their employees R5.2 billion

The Financial Sector Conduct Authority (FSCA) has revealed that South African employers have R5.2 billion in outstanding pension fund contributions, and many employees are completely unaware.

The FSCA announced that it had published the names of 2,330 employers who violated section 13A of the Pension Funds Act, which regulates how pension contributions and benefits should be paid.

By the end of December 2023, the FSCA had identified 7,770 non-compliant employers but chose to publish only those who met specific criteria –

• 2,003 employers had over R50,000 in outstanding contributions for more than five months
• 200 employers owed over R50,000, but their last recorded contribution date was missing
• 113 employers had less than R50,000 in unpaid contributions, but late payment interest exceeded R50,000, outstanding for more than five months
• 20 employers had never made contributions since joining the fund

The remaining 5,440 employers were not listed as they did not meet the required thresholds.

The FSCA’s head of fund governance and trustee conduct, Zareena Camroodien, explained on the Kaya Biz podcast that outstanding contributions to pension funds have been a longstanding issue dating back to the 2000s.

However, with the new two-pot system, which was introduced in September 2024, the issue started receiving real attention.

This is because as members tried to make a withdrawal from their savings pot, there was either nothing or insufficient funds.

In other words, these employees were completely unaware that their pension contributions had not been made.

“Historically, we do require funds or boards of funds to report to us when there’s non-compliance with the payment of contributions, and they usually engage us as to how they’re going to fix this problem,” she said.

“But as you can see, with the R5.2 billion outstanding, this problem just seems to have ballooned.”

Camroodien added that in the last few years, the FSCA has started naming and shaming non-compliant companies.

They discovered this R5.2 billion figure by obtaining information from the funds about the non-compliant employers.

She explained that some of the major culprits can be found in the bargaining council funds.

This includes, for example, the private security sector and contract cleaning. “That’s where you find levels of high non-compliance amongst employers.”

These types of employers will argue that because they are small and rely on contracts, they do not have a constant flow of income to make pension fund contributions.

According to Camroodien, there is also a high level of non-compliance among municipalities.

They’ve indicated that they have budgetary shortfalls which are affecting their ability to fulfil their statutory obligations, including the payment of retirement funds.

Unfortunately, beyond naming and shaming, the FSCA does not have any real power to hold employers accountable since the body only has jurisdiction over funds, not employers.

However, this is expected to change with the enactment of the Conduct of Financial Institutions (COFI) Bill.

Once implemented, the bill will bring employers under FSCA supervision for pension contribution payments, among other financial responsibilities, and give them greater enforcement powers.

In the meantime, the FSCA is engaging directly with pension fund boards to ensure they take action against non-compliant employers. It is also working with the National Prosecuting Authority (NPA) to pursue criminal sanctions against offending companies and individuals.

These efforts have already yielded results. In cases such as Kai ǃGarib Municipality and Norberg, municipal managers have been arrested for failing to make pension payments.

A recent ruling on 17 January against the Mafube Local Municipality held the municipal manager, executive mayor, and others jointly and severally liable for pension arrears.

Additionally, the FSCA is working with NELAC (National Economic Labour and Affairs Council) to address the issue with the support of social partners, including organised labour and business groups.

It is also engaging with SARS and the National Treasury to develop broader solutions and improve compliance in the sector.

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How employees can check their contributions

For employees who want to ensure their pension contributions are up to date, Camroodien provided the following key steps.

First, they should regularly check their benefit statements, which are issued annually by their pension fund.

If employees have any concerns about missing contributions, they can contact their member trustees, employer trustees, or the fund administrator to request details about their contributions and available benefits.

The introduction of the two-pot system has increased awareness, with more employees actively monitoring their pension balances than ever before.

Additionally, employees should be aware that pension fund boards are legally required to notify them within 30 days if their employer fails to pay contributions on their behalf.

Staying informed and proactive in checking pension contributions can help employees avoid financial shocks when they retire or need to access their savings.

Camroodien stressed that while awareness is improving, employees must remain vigilant to ensure their retirement savings are protected.