Staff pensions underpaid

More than 7,000 employers default paying over money to fund administrators

About 315,000 workers have had their monthly pension contributions not paid over to their retirement fund administrators by their employers. 

This means should they resign or retire today, they will not get the full amount owed to them by their employers. 

According to the Financial Sector Conduct Authority (FSCA), there were 7,770 employers that had defaulted and failed to pay their workers' contributions to various pension and provident fund administrators as of December 2023. The two-pot retirement system, which came into effect in September, has also exposed defaulters.

The list which was published two weeks ago showed that 156 municipalities were short-changing their employees and they included Emfuleni and eThekwini municipalities which were behind by 246 months each, Enoch Mgijima (153) Ekurhuleni (115), Vhembe (114), Matjhabeng (89) and Ditsobotla (51).

Legends Barber shops in Rosebank and Florida Road in Durban were also listed as defaulters including Sorbet beauty shops in Hyde Park, Eastgate Mall, and Cresta Mall in Gauteng. ANC chief whips office in parliament is also behind by 159 months.

Defaulting in paying pension to administrators is a criminal offence as it is in contravention of section 13A of the Pension Funds Act. The responsible person of the company or its directors may be liable on conviction to a fine not exceeding R10m or to imprisonment for a period not exceeding 10 years or both.

The employees are aware because the municipality is communicating with them monthly. Also, their different pension funds are sending them SMSes to update them about the non-payment of their contributions by the municipality.Pius Batsile

According to finance minister Enoch Godongwana's replies to EFF MP Ntokozo Mkhonto in parliament recently, retirement funds must take all reasonable steps to ensure that contributions are paid timeously to the fund per the act. 

“Boards are required to report non-payment of pension contributions to the FSCA, inform members and report to police where applicable. The FSCA monitors reports received from retirement funds and is empowered to charge penalties in cases of non-compliance.”

He said the funds are required to communicate with employers about the actions taken to recover outstanding contributions and the reasons for the partial or non-payment of the contributions. 

The owner of Sorbet at Eastgate said she took over the shop in June last year and is still paying off her debt to the purchase of the shop. She said so far she has paid R60,000 to the fund and in October she made an arrangement with her fund administrator to pay off outstanding debt for her nine employees who each contribute R400 per month. 

“Some employees are registered but I wasn't even deducting from them because some of them are still under the old employer's details and not my company details,” she said.

Pius Batsile, spokesperson on Ditsobotla municipality in North West, said they could not pay over their employees' contributions due to financial difficulties caused by poor revenue collection.

“The employees are aware because the municipality is communicating with them monthly. Also, their different pension funds are sending them SMSes to update them about the non-payment of their contributions by the municipality.”

He said the municipality is working on a plan to improve revenue collection and hopes to pay outstanding pension debt by the end of December.

EThekwini, Ekurhuleni, Emfuleni, Enoch Mgijima and Vhembe municipalities said their accounts were up to date as they had made arrangements with retirement fund administrators before the release of the list of defaulters last month. 

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