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Employers have been robbing employees of their pension savings for years

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. 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.

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.