Business
Over R5 Billion Lost in South Africa as Employers Fail to Pay Pension Contributions
South Africa’s Pension Crisis: R5 Billion in Employer Arrears
The Financial Sector Conduct Authority (FSCA) has exposed a troubling reality in South Africa: over R5 billion in pension contributions remain unpaid by thousands of employers, leaving workers without critical benefits.
This widespread non-compliance violates the Pension Funds Act (PFA) and has severe consequences for employees relying on retirement savings and related benefits.
The Scope of the Problem
As of December 2023, the FSCA reported:
- 2,003 employers owe more than R50,000, with contributions outstanding for over 5 months.
- 200 employers have unpaid contributions exceeding R50,000, but no date of last payment.
- 113 employers owe less than R50,000, but late payment interest (LPI) exceeds R50,000.
- 20 employers have never contributed since their participation in retirement funds began.
These figures, however, only reflect part of the issue, with thousands of other employers failing to meet smaller thresholds.
The Impact on Employees
The non-payment of pension contributions directly affects employees’:
- Withdrawal benefits under the Two-Pot System.
- Investment returns tied to retirement savings.
- Risk benefits such as death and disability cover.
The FSCA warns that withholding deducted contributions amounts to theft or fraud, particularly when funds are removed from employees’ salaries but not deposited into retirement accounts.
A Broader Problem
The issue recently came to light as workers attempting to withdraw part of their pensions under the new Two-Pot System found no funds available. Shockingly, some employers have failed to contribute for up to 20 years.
Municipalities like Kai !Garib, Renosterberg, and Kamiesberg have drawn attention for their pension mismanagement, with arrests already made in these cases.
Regulatory Challenges and Solutions
While the FSCA regulates retirement funds, employers are not considered regulated entities under the PFA, limiting the authority’s ability to take direct action. The FSCA has recommended introducing the Conduct of Financial Institutions (CoFI) Bill to address this gap.
Actions taken to recover unpaid contributions include:
- Legal proceedings.
- Enforcement through bargaining councils.
- Complaints to the Office of the Pension Funds Adjudicator.
- Reports filed with the South African Police Service (SAPS).
The FSCA is also working with the National Prosecution Authority (NPA) and the Directorate for Priority Crime Investigations to hold offenders accountable.
What Can Affected Employees Do?
If pension contributions are unpaid, the FSCA urges employees to:
- Engage directly with employers and retirement funds.
- Lodge a complaint with the Office of the Pension Funds Adjudicator if discussions fail.
A full list of non-compliant employers is available on the FSCA website, offering transparency and resources for affected individuals.
The Way Forward
As South Africa grapples with this crisis, the FSCA is pushing for stricter enforcement and systemic changes to ensure compliance. The success of these efforts will be critical in restoring trust and stability to the retirement system, protecting millions of workers who depend on it for their future.
For the latest updates, visit the FSCA website or consult your retirement fund provider.
