Employers have been robbing employees of their pension savings for years
IT’S EASY to become apathetic towards ongoing reports of corruption and fraud in the local media. However, there’s a particular malpractice that has been directly sabotaging employees’ and their families’ financial security for over 20 years: pension fund theft.
Pension fund theft refers to when employers deduct contributions towards a pension or provident fund from employees’ salary, but instead of transferring it to the fund, they use the money for their gain, in effect ‘stealing’ employees’ money.
This is against the provisions of the Pension Fund Act, and punishable as a criminal offense by a hefty fine, imprisonment or both. In some cases, employers also fail to pay their part of the contributions.
When employees resign or retire and want to access their savings, they’re consequently in for a nasty surprise. Or, if they pass away, there are little to no benefits to pay out to their dependents, often leaving their loved ones in dire financial circumstances.
Some culprits have been dealt with, but a lot remains to be done.
In August 2023, the Financial Sector Conduct Authority (FSCA), which regulates the retirement fund industry, released a list of non-compliant employers to the public to shame the perpetrators. Since then, about 90 convicted employers have agreed to settle what they owe.
Unfortunately, that’s only a fraction.
The FSCA list includes approximately 4 000 companies and municipalities that owe about R7 billion in pension fund payments, going back as far as 21 years.
The security sector is one of the hardest-hit
More than 80% of the companies on the FSCA list are security companies. With over 570 000 people in active employment in South Africa’s private security sector, thousands of people’s financial wellbeing is at risk.
One of the funds that received the most complaints is the Private Security Sector Provident Fund (PSSPF), formed in 2001. By 2012, it was reported that over R45 million had already been deducted from salaries but never transferred to the PSSPF. By 2016, this amount had risen to R275 million.
In 2019, the FSCA launched an official investigation into the PSSPF. The highly complex investigation took three years to complete, with the final penalties confirmed only in 2023. PSSPF board members were found guilty of failing to fulfil their duties and removed from office.
However, while this was a significant victory, it’s only a drop in the bucket. More collaboration and reform are needed
Due to limited resources and the number of companies involved, regulatory bodies are struggling to enforce compliance to pension fund legislation. To solve this crisis, we need stronger regulatory frameworks, better enforcement mechanisms, greater corporate accountability, and collaboration among all stakeholders.
How you can make a difference
While a great deal of the required action falls into the sphere of the public and private sectors, any employee who is a pension fund member can help by reporting irregularities to the Pension Funds Adjudicator.
Here are some steps to follow if you suspect that your pension monies have been stolen:
Check your documents for discrepancies
- Review your payslips: Check whether retirement fund contributions are being deducted from your salary as per your employment contract.
- Review your fund benefit statements: Request a benefit statement from your fund and check whether your contributions have been credited to your account within the retirement fund.
Get in touch with your employer and retirement fund
- Contact your HR department or payroll administrator: Ask them about any discrepancies between your salary slips and fund benefit statements.
- Contact your principal officer: Ask them to confirm that contributions by and on behalf of you have been paid into the bank account of the retirement fund.
- Contact your pension fund administrator: Confirm whether they have received your contributions.
Report the issue to the authorities
- Complain with the regulator: Lodge a complaint with the Financial Sector Conduct Authority (FSCA) to which all retirement funds must report on non-payment of contributions. Non-payment of contributions is a criminal offence, and the principal officer is required to report it to the police.
Be persistent and proactive
- Monitor progress: Regularly follow up with your employer, retirement fund and the FSCA to ensure that your case is being addressed, and that necessary action is taken against the employer by the fund and the FSCA. (The FSCA has a policy of publicly naming and shaming employers that are in arrear with fund contributions.)
- Stay informed: Stay up to date with any changes in your rights or the pension regulations that might affect your case.
- Network: Connect with other affected colleagues and employees to strengthen your collective bargaining power and share resources.
- Notify your trade union: If you’re a member of a trade union, they can provide additional support and resources, so inform them as well.
While your case is being addressed, consider taking the following steps:
Get legal advice
- Know your rights: Find out what your legal rights are and what potential remedies are available, including pursuing legal action against the employer.
- Consult a lawyer: Consult a labour lawyer who specialises in retirement and employment law. Keep in mind that this can be costly. Legal action is a last resort if the dispute resolution procedures that are free of charge have been exhausted. Normally the fund needs to institute criminal and civil legal proceedings against an employer.
- Unable to afford a lawyer? Legal Aid South Africa offers free legal advice and presentation to individuals below a certain financial standing. To find out whether you qualify, click here.
Raise public awareness
- Share your story: Consider sharing your story on social media or with traditional media like newspapers or news websites (GroundUp), and industry media (Today’s Trustee) to raise awareness about the issue.
- Personal Finance would also consider publishing stories providing information on how to prevent pension fund theft, as well as how stolen funds were recovered. You can also contact us at info@bellanmedia.co.za.
Consider alternative measures
- Look into alternative solutions: Find out about mediation or arbitration as ways to resolve the dispute outside of court.
- As a last resort, you can lodge a formal complaint with the Pension Funds Adjudicator (PFA). Download and submit a claim form, log a complaint on their website, or contact them by email or telephone (012 748 4000).
Get financial advice
If your case is taking long to be resolved and you’re struggling to meet your immediate financial needs, get financial advice about your options.
Document everything (vital!)
- Make sure that you keep track of all interactions and documents throughout the process.
- Keep a detailed record of all email and phone correspondence with your employer, pension fund, the FSCA and any other related parties.
- Make copies of all relevant documents such as payslips, pension statements, and correspondence and keep these in a safe place.
Atleha-edu is a non-profit organisation providing financial education to retirement fund trustees and members, in partnership with Strate and the ASISA Foundation.
