Shift in control of pension schemes | Fin24
  • Covid-19 Money Hub

    The hub will help answer your business and money questions during the coronavirus crisis.

  • Coronavirus Funding

    Could a R100 billion social impact bond help fund SA's Covid-19 interventions?

  • Money Clinic

    I have invested R1m to be paid out monthly, I have not received any during Covid-19. What can I do?


Shift in control of pension schemes

Aug 06 2014 17:53

Cape Town - There is a noticeable shift in control of pension schemes away from employers, and pension benefits are now seen as deferred income," according to Karin MacKenzie, director at Herold Gie Attorneys.
"This trend should be seen against the backdrop of the strong labour protection framework in South Africa and the increased negotiating strength of organised labour."
"Pension assets are the largest slice of the fiscal pie and control of funds and 'fair' benefits are becoming a politally and economically sensitive issue," she continues.
"The social importance of pension resources means a need for protective regulation. These factors have led to substantial and complex legislation and compliance issues that affect both funds and employers that participate in them."
The Pension Funds Act imposes duties on an employer, and it is required to act in good faith.

The payment of contributions is obviously a primary obligation, and there is a tightening regulatory framework to deal with this. Often when businesses are in financial distress, the pension contributions are the first casualties.

Because of large scale default, particularly amongst smaller employers, the sanctions have been beefed up in the latest amendments and the statutory provisions have been given teeth:
- Non-payment of contributions has been re-criminalised, and employers who fail to pay them over could look at fines of up to R10m or imprisonment for 10 years;

- Directors and proprietors are now made personally liable for contributions;

- Late payment attracts hefty interest.
Another piece of legislation, which impacts on employers is the Protection of Private Information Act (Popi), which protects the confidentiality and privacy of personal information.

Typically, employers will be required to transmit sensitive information regarding health, age and income for benefit purposes, and will have to ensure that proper systems are in place to prevent the misuse of such information.
"They must comply with the fairly onerous POPI requirements. The breach of these provisions could also attract substantial criminal fines or imprisonment," explained MacKenzie.
Other areas employers ought to take note of are:
- The circumstances in which losses sustained through the misconduct of an employee may be recovered from pension benefits;

- Transfers of business under section 197 of the Labour Relations Act and their impact on pension benefits;

- When they may be liable for unfunded benefits – this requires a knowledge of the obligations under the fund rules;

- Applying for exemption when covered by a collective agreement or sectoral determination if they already participate other benefit schemes;

- The need for employee representation on boards of trustees;

- The impact of business rescue on pension contributions.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

pension funds  |  retirement  |  money


Read Fin24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Voting Booth

How has Covid-19 impacted your financial position?

Previous results · Suggest a vote