Employer short-paying retirement fund ordered to make good

An eagle-eyed provident fund member caught his employer out for deducting more in contributions from his salary than it paid into the fund.

He took the matter to the Pension Funds Adjudicator, who ordered the employer to pay him back the difference with interest. The adjudicator also ordered the employer to pay outstanding contributions to the fund and to pay future contributions in line with the fund rules.

Muvhango Lukhaimane, the adjudicator, says some employers obtained concessions to reduce contributions to retirement funds when the Covid-19 pandemic hit – but these concessions also reduced contributions from employees and were typically for a limited time.

Contributions can only be reduced if the rules of the fund allow for it – the trustees of many funds approved rule changes to allow these concessions and save jobs during the pandemic. Rules changes have to be approved by the Financial Sector Conduct Authority (FSCA) before they can be implemented.

Deductions not paid over

In the matter that came before the adjudicator recently, the Private Security Sector Provident Fund had amended its rules to allow employers and members to reduce contributions from 7.5% to 5% of members’ earnings from September 2021 to March 2023.

But Bamogale Enterprise continued to deduct 7.5% from the member’s income while only paying over 5% to the fund. The member noticed that Bamogale was deducting R342 from his salary but his statement from the fund showed only R228 was being paid into his fund. The employer had withheld the balance for more than a year.

In addition, the fund told the adjudicator that the member had joined the fund in March 2020 despite joining the company in December 2019 and that contributions for May 2020 to September 2020 were lower than the rate in the fund’s rules.

Fund aware of arrears

The fund said the member had accumulated R10 634 in the fund by mid-February 2023, but the member’s fund credit was R4 556 in arrears for December 2019 to February 2020 and November 2022 to January 2023. The late payment interest on this amounted to R1 803 up to mid-April 2023.

The adjudicator’s office asked the employer to comment but it failed to do so, she says.

Lukhaimane therefore ordered the employer to repay the member the amounts in excess of the contribution rate that it had deducted from his pay. She ordered this be repaid to the employee with interest within four weeks.                                                                             
She also ordered the employer to provide the fund with the correct contribution schedules to allow the fund to accurately calculate the amount of the unpaid contributions and the interest on it. She set strict deadlines for the fund and the employer to ensure the amounts were paid into the fund.

Lukhaimane also ordered the employer to resume full contributions payments to the fund as the concession approved in the fund rules had expired in March 2023.

Most members unaware

While the employee in this case was watching his provident fund statements and picked up the discrepancy, many other employees are unaware that their employer has deducted contributions from their wages or salary and failed to pay that money over to their retirement fund.

They only find out when they claim their benefits on resignation or retirement, and realise they have been short-paid, Lukhaimane told the recent Pension Lawyer’s Association conference.

More than 40% of the more than 8 000 complaints the adjudicator deals with annually concern employers not paying contributions, not paying on time or paying reduced contributions, she said. Read more: New measures to stop employers from failing to pay retirement fund contributions.