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The implementation of the Two-Pot Retirement system exposed thousands of employers deducting contributions from employees but failing to transfer the money to the retirement funds, instead using it to subsidise cash flow.
The CEO of the Motor Industry Staff Association (MISA) Martlé Keyter says 25% of employers in the retail motor industry are in arrears with provident fund contributions.
She says if an employer deducts any contributions from the employee, whether or not it is towards the provident fund, the Union or the Unemployed Insurance Fund, it must be transferred to the beneficiary and failure to do so is fraud.
"The Pension Funds Act was amended in 2014, adding provisions that make controlling shareholders, members of close corporations, company managing directors, trustees and partners personally liable for an employer's failure to pay contributions.
Keyter says they can be fined up to R10 million or imprisoned for up to 10 years.
This comes after MISA's Legal Department received complaints from members wanting to withdraw their savings pot, only to find that their contributions are not up to date.
Tiekie Mocke, Manager of MISA's Legal Department, says the Union report these employers to MIBCO.
Where MISA has laid criminal charges against employers in the past, there was a reluctance from the South African Police Service (SAPS) to investigate because they prefer it to be handled as a civil matter.
According to Mocke this conduct of employers places the affected employee at risk that benefits like the Death Benefit won't be paid out to loved ones should something happen to you.
The same principle applies if you are suddenly unable to continue working due to ill health.
Keyter says it is the responsibility of the employee to check if your contributions are paid up.
This problem is not limited to the retail motor industry.
The Pension Fund Adjudicator and Financial Sector Conduct Authority are concerned by the failure of some companies to contribute towards pension funds. According to the Pension Funds Adjudicator Office for some companies, this goes as far back as 20 years, which is a criminal act and there needs to be accountability.
Pension Fund Adjudicator Muvhango Lukhaimane said that 82% of their caseload for the current financial year was complaints by workers whose employers were not paying their pension deductions over to administrators.
She told Jeremy Maggs on his Midday @Moneyweb Podcast last week that the biggest sector at the moment is the private security sector.
They also received several complaints from the retail sector and the metal and engineering sector.
Lukhaimane said unfortunately municipalities and some SEOs also fall foul of the law.
