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JIMMY MOYAHA: The Financial Sector Conduct Authority (FSCA) has launched an investigation into employers’ contributions to pension funds for their employees. Disturbingly, there’s been a significant rise in instances where employers neglect to make these contributions, tallying over R5 billion in owed amounts.
To address this, the FSCA is considering various strategies to enforce compliance among those failing to meet their obligations.
I’m joined by Zareena Camroodien, the head of Fund Governance and Trustee Conduct at the FSCA, to discuss this issue and the forthcoming actions.
Good evening, Zareena. Thank you for your presence. Can you elaborate on how we’ve accumulated R5 billion in unpaid contributions and the timeline of this issue?
ZAREENA CAMROODIEN: Good evening to you and the listeners, and thank you for allowing the FSCA to share this important information. The topic of unpaid contributions is not a new phenomenon. As you indicated, surpassing R5 billion in unpaid amounts has been an ongoing concern.
However, the recent introduction of the two-pot retirement savings system has brought this problem into sharper focus.
As this system was rolled out, members sought to access the savings portion, only to discover they were unable to do so because of either a lack of funds or inadequate funds.
This spotlight on the issue of delayed contributions is timely. While it’s a persistent problem, the FSCA, along with various social stakeholders, is committed to addressing it.
JIMMY MOYAHA: Do we have information about specific businesses that have failed to contribute? We are aware that sectors such as private security have been significant offenders, along with municipalities. Is there detailed data available regarding non-compliant organizations and the amounts owed by each?
ZAREENA CAMROODIEN: Yes, we maintain a comprehensive breakdown as we gather information from the funds concerning non-compliant employers. As you’ve noted, the private security sector is a major offender, as are the hairdressing, beauty, and skincare sectors.
Employers involved in bargaining councils across various sectors including construction, metal, transport, contract cleaning, and furniture, are also significant contributors to this problem.
Municipal funds are yet another area where municipalities have neglected their contribution obligations.
Thus, we possess a clear understanding of the primary offenders when it comes to unpaid contributions.
JIMMY MOYAHA: What actions does the FSCA plan to take? Some individuals may be unaware that under the Pension Funds Act, failing to pay these contributions is a criminal offense. This is a serious matter, and I assume you and other parties, including the pension funds adjudicator, are treating it with the utmost importance.
What paths are you exploring to ensure accountability?
ZAREENA CAMROODIEN: That’s a pertinent question. We are investigating several options.
Firstly, we have been engaging with the National Prosecuting Authority (NPA). We started discussions last year and aim to continue these conversations, believing that a robust legal response will send a strong message, even if it’s not an ideal scenario.
When employers fail to meet their obligations, it constitutes a statutory offense, and it may even be categorized under common law as theft.
It’s crucial to communicate a strong message when contributions are deducted from employees but not remitted.
We have previously seen successes in cases involving municipalities like Kai Garib and others in the Northern Cape.
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We want to ensure that more employers are held accountable for their non-compliance.
Regrettably, we recently had a ruling from the Bloemfontein High Court regarding the Municipal Workers’ Retirement Fund, where municipal managers and executives were held personally accountable.
The court has referred this case to the NPA for further investigation and potential criminal prosecution. We view this as a significant step toward accountability.
Another strategy would involve collaborating with boards, encouraging them to either bring contributions up to date or suspend them—while keeping relevant stakeholders engaged—until compliance is achieved, while also ensuring that risk benefits and administrative costs are maintained.
We are also considering enforceable agreements, similar to what was successfully executed with the ANC staff’s Provident Fund, where the FSCA and the employer reached an agreement that ensured the ANC’s consistent contribution.
We are actively exploring various strategies to effectively tackle the issue of unpaid contributions.
JIMMY MOYAHA: What role do pension fund administrators play? We know they are under FSCA regulation. Could some responsibility lie with them? Is there a pathway to address non-compliant administrators, if they exist? While it’s understood that some administrators can only fulfill their roles when contributions are made, might there be an opportunity for us to take action here?
ZAREENA CAMROODIEN: Ultimately, the primary fiduciary duty falls to the fund trustees—the board of the fund. Administrators carry out administrative responsibilities, but the accountability lies with the board. They can delegate tasks, but such delegation doesn’t absolve them of their obligations.
For instance, they might delegate responsibilities to contact non-compliant employers or identify responsible parties within those organizations. However, it remains the board’s responsibility to ensure that member contributions are submitted.
JIMMY MOYAHA: It’s vital that contributions are made, as the pensions and livelihoods of many depend on it. The FSCA is dedicated to implementing the necessary measures to ensure compliance among employers who are not contributing.
We’ll wrap up our discussion here, Zareena. Thank you for your valuable insights. That was Zareena Camroodien, head of Fund Governance and Trustee Conduct at the Financial Sector Conduct Authority, sharing her views on the issue of unpaid pension contributions by employers.
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