Arrear pension contributions: FSB to name, shame errant employers

The Financial services Board (FSB) intends naming and shaming employers who deduct retirement contributions from their employees’ pay packages and fail to pay the money over to the funds.

In addition, Jurgen Boyd, the deputy pensions fund registrar, says it would send the right signal for government and corporates to make it a requirement that contractors tendering for their business prove they are up to date with their retirement fund contributions.

“Further, we are calling on government and corporate South Africa to use moral suasion to ensure that all service providers they outsource to, are up to date with paying over employees’ pension contributions. For example, this can be done by way of a six monthly certification by pension fund administrators of zero arrear contributions by the relevant employers.

“As the biggest culprits appear to be employers in the private security and contract cleaning industries, the FSB is considering publishing a list on its website of those recalcitrant employers who are in arrears in paying over the provident fund and pension fund contributions of their employees. This list will be updated monthly and in the interests of good corporate citizenship, companies are encouraged to scrutinize the list and take the necessary steps to ensure that their service providers are compliant. ”

At the recent Pension Lawyer Association conference in Cape Town, it emerged that there has been an increase in the number of employers being reported to the FSB for the non-payment of contributions, and the regulator is hoping soon to impose a severe penalty on errant employers through its enforcement committee.

Previously, the non-payment of contributions was a criminal offence, but non-payment was decriminalised when the enforcement committee was introduced so that non-compliant employers would not be penalised twice.

For employees, the effect of non-payment of contributions is that they lose their retirement savings, do not receive any investment growth and, after two months of non-payment, lose their group life assurance. The lost group life assurance is often the only life assurance cover fund members, particularly lower-income employees, have as protection for their families.

Most fund members, or their dependents in the case of death of a member, find out they have been short-changed only when they want to claim their due benefits.

In terms of the Pension Funds Act, all contributions (from the employee and the employer) must be paid within seven days of the contributions falling due.