Most employers help employees to retire better by setting up, participating in and/or contributing to a retirement fund on their behalf.
But South Africa does have numerous cases where retirement fund members have been denied the full benefits to which they are entitled as a result of employers failing to pay contributions to their funds.
Members often only become aware of this when they leave a fund and find their withdrawal or retirement benefits are lower than they expected because the full contributions have not been paid.
Many complaints about this are lodged with the Pension Funds Adjudicator. In an attempt to address this amendments have been made to the Pension Funds Act and a Conduct Standard on the payment of pension fund contributions has been issued under the Financial Sector Regulation Act to deal with the issues.
Rules create a liability
If you are a member of an employer-sponsored or umbrella fund, the rules of the fund will state what percentage of your salary should be deducted from your salary each month for your contributions, and the amount your employer will contribute.
The Pension Funds Act obliges your employer to pay these contributions over to the fund within seven calendar days of the end of the month for which the contribution is payable.
In 2014, the Pension Funds Act was amended making directors, members of a close corporation or the governing body of an employer, who are regularly involved in the company’s financial affairs, personally liable for an employer's failure to pay contributions.
Fund trustees are obliged to ask the employer to provide the name of the director or member who is responsible for ensuring contributions are paid over both when the employer sets up or starts participating in a fund, and each month when the employer submits the schedule of contributions paid.
If the employer fails to notify the fund in writing who is liable, all directors and members of the close corporation or governing body responsible for financial affairs can be held liable for any failure to pay contributions.
If an employer fails to pay over its contributions and the amounts it has deducted from your salary as contributions, it commits a criminal offence in terms of common law.
The Act provides that the responsible person at an employer can be fined up to R10-million or imprisoned for up to 10 years for failing to pay over contributions.
Reporting
Your fund's administrator is obliged to report any failure by an employer to pay contributions to the principal officer of the fund or a person appointed to monitor these payments within 15 days of the payment deadline.
It must also report the employer if the contribution statement is not received or if there are discrepancies in the payments made and due amounting to more than 2.5% of the contributions due.
The Act also makes the principal officer of the fund, or a person authorised by the board of trustees, responsible for monitoring that the contributions are paid to the fund in time.
The principal officer, or the person authorised by the board, must report the employer’s failure to pay over the contributions to the trustees within seven days of receiving this information.
The board then has 30 days to decide if there has been "material" non-compliance. If the board is given an acceptable reason for the employer’s failure to pay the contributions, and is reasonably sure the failure will be corrected, the trustees can decide to take no action. But if it decides there is material non-compliance it must report this to:
If the employer's failure to pay contributions is not rectified within 90 days, the board is obliged to:
A commercial umbrella retirement fund will typically terminate the membership of an employer group when contributions are outstanding for more than a few months.
Interest
If an employer is late paying the contributions to the fund, the fund must calculate interest at an interest rate set in terms of the conduct standard at the repurchase rate (repo rate) plus two percentage points.
Lodge a complaint
If you are a member of a fund who finds out your contributions have not been paid to their fund in full, you 
can complain to the Pension Funds Adjudicator. Read: Where to complain
The adjudicator can order the responsible person at your employer to pay the outstanding contributions and should he or she fail to do so, the determination can be taken to court and assets held personally by the responsible person can be attached in order to recover the amount owed.
Suspended contributions
Funds are required to have rules in place to deal with situations like the lockdown during the Covid-19 epidemic when employers struggled to pay contributions because they were not able to operate and/or employees were not able to work.
The FSCA urged employer-sponsored funds to consult with employers and in cases where funds did not have rules in place, to file rule amendments making provision for a suspension, postponement or reduction of contributions and/or a reduction of pensionable service.
Funds were required to inform affected members of employers’ requests to reduce or suspend contributions, and of proposed rule amendments within 30 days of receipt of such requests.
Sources:
FSCA Conduct Standard 1 of 2022
https://discover.sabinet.co.za/webx/access/netlaw/24_1956_pension_funds_act.htm#section13A
https://www.fsca.co.za/Regulatory%20Frameworks/Temp/FSCA%20COMMUNICATION%2011%20OF%202020%20(RF).pdf
