A R7bn shortfall shakes trust in retirement funds
The Financial Sector Conduct Authority (FSCA) has again turned up the pressure on delinquent employers, publishing its fourth list of non-compliant companies under section 13A of the Pension Funds Act (PFA). The latest data set reveals that 15521 employers across 67 retirement funds are in arrears, with outstanding contributions to pension funds plus interest estimated at R7.29 billion as at March 2025.
Arrears on a rising trend
One of the principal concerns is that despite monthly reporting from funds to the FSCA and regular examinations of the problem published by the media, we are seeing a rising trend. Just 18 months ago, in December 2023, the tally stood at 7770 employers and R5.2 billion. “Employers have an ethical, fiduciary and legal duty to ensure that deductions from salaries are promptly and fully remitted to pension funds,” Commissioner Unathi Kamlana told journalists at a media roundtable.
The Commissioner restated the authority’s no-nonsense stance on the illegal practice of deducting employees’ pension contributions without remitting them to the respective pension funds. Aside from undermining employees’ trust, the failure to pay over retirement fund contributions amounts to serious financial misconduct or even criminal fraud, with severe consequences. “By continuing to shine a spotlight on these practices, we aim to deter misconduct, safeguard workers’ futures and reinforce confidence in the retirement system,” he said.
The arrears crisis has a direct impact on the recently implemented two-pot retirement system, in that workers trying to access their savings pots “discovered to their shock that their employers had not been paying regular contributions to their pension funds, leaving them with nothing or very little to access.” Your writer is horrified too that in this age of digital platforms one still finds pension fund members who are not keeping track of their fund accumulations at least annually.
Three weighty matters for your review
There were three revelations worthy of further probing. The first is the FSCA’s reliance on public exposure as an enforcement tool. “Although we currently do not have jurisdiction over employers, [because] they are not regulated persons – we have taken this step of issuing these publications as a tool to name and shame non-compliant entities,” Kamlana said. Elsewhere in his brief introduction, he revealed there had been a number of 13A-related arrests in certain municipalities. In other words, criminal sanction is possible under existing laws.
The second point is that, despite existing legal channels, the FSCA is keen to strengthen enforcement under the forthcoming COFI framework. Treasury’s COFI papers indicate that participating employers will be classified as “supervised entities” for limited purposes relating to section 13A, enabling the FSCA to compel information, conduct inspections and levy administrative penalties where contributions are not paid. If enacted as proposed, this would extend the authority’s reach specifically for 13A compliance, even though other criminal and labour remedies already exist.
And the third is that the data underpinning this enforcement drive is in question. In her brief presentation to the roundtable, Deputy Commissioner Astrid Ludin conceded that 428 of the employers named and shamed in the last presentation had been removed from the list as an erratum. “The Private Security Sector Provident Fund (PSSPF) had reported 531 employers and 428 of those have now been removed from the list,” she said. The reason: most of these companies were no longer trading and had been deregistered at the CIPC.
Accuracy paramount in the reputation context
Although the FSCA presents this as evidence that data quality is improving, it serves as a reminder that enforcement by naming and shaming is a rather blunt instrument. Just imagine the harm to key individuals or representatives in the financial services industry if an employer accidentally named a few dozen as contravening the fit and proper standards. Even so, Ludin defended the method: “Publication is a very important tool to ensure transparency and accountability of employers, also of pension funds to their members.” Fair enough, but perhaps some tougher fact-checking first.
The Deputy Commissioner noted that reporting has broadened materially, “from 23 funds in the first publication in 2023 to 67 funds now.” She also explained that the number of employers in default had grown significantly on the back of two very large funds, the Motor Industry Provident Fund and the Auto Workers Provident Fund, submitting their data. Those two funds account for 57.5% of the employers whose names were published. Not to go off on a tangent, but it is worth noting that the local motor industry is in serious trouble, weighed at the moment by a 30% United States trade tariff and a flood of cheap imports from China.
If you unpack the data further, you will find that only 5821 of the employers met the authority’s publication thresholds of arrears above R50000 overdue for five months or longer. A smaller cohort had contributions under R50000 but late-payment interest above that mark, while 17 employers had only interest outstanding. According to the FSCA, 43% of arrears are 24 months or newer, while some of the oldest buckets reflect discrete causes such as contribution rate hikes in a municipal fund or non-trading firms registered in bargaining council environments.
Arrears versus interest
The money story is equally layered: of the R7.29 billion headline figure, about R4.31 billion is unpaid contributions and R2.98 billion is late-payment interest. In private security, employers are often paying the contributions but leaving the interest behind, which inflates the arrears picture over time. In the context of the two motor industry funds named earlier, few will be surprised to learn that roughly 62% of the named employers are in the motor or private security sectors. The motor industry funds are confronted by about R1.98 billion of the total arrears. Overall, there are more than 592000 members affected across funds.
The slide deck released during the roundtable shows a sharp rise in criminal referrals. SAPS cases climbed from 113 in the December 2023 publication to 1010 in this round, alongside 8320 civil legal actions lodged by funds, 2341 bargaining council processes, 441 credit listings, 486 settlement arrangements and 3466 terminations or liquidations. There have been arrests in Northern Cape municipalities, and the regulator highlights a long-running court matter involving a private security employer.
Parallel to this, just under 1200 employers were referred to SARS, and National Treasury’s withholding of equitable share transfers has prised funds loose from municipalities, with one fund reporting R39 million received between November 2024 and April 2025, and roughly R50 million recouped via the July tranche. Labour-side fixes are also on the table, with proposed amendments to the Basic Conditions of Employment Act set to empower the Labour Court, CCMA and bargaining councils to compel payment and strengthen inspector powers.
Compliance: a reputational necessity
Ludin, for her part, remained insistent that publication, despite its flaws, was an effective deterrent. “We have very strategically decided to publish at particular intervals, and we think publication is a very important tool to ensure transparency and accountability of employers, also of pension funds to their members,” she said. It was a qualified defence, but it underlined the regulator’s belief that reputational exposure forces compliance where the courts, bargaining councils and even police dockets fail.
Commissioner Kamlana closed with a harder edge, reminding employers that section 13A is not optional and hinting that the COFI regime will strengthen the FSCA’s hand. “Our intention is to send a very clear message: the practice of withholding employees’ pension contributions without remitting them to the respective funds will not be tolerated,” he said. His words suggest a future in which delinquent employers fall directly under FSCA scrutiny for 13A compliance.
Writer’s thoughts:
The FSCA’s hope of bringing employers under COFI for section 13A enforcement could close compliance gaps, but risks overlap with existing laws. Should the conduct authority step in where traditional enforcement has failed? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
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