Workers face uncertainty over retirement savings as unions warn that billions in pension contributions have not been paid over by employers.
Image: ChatGPT
Labour unions have sounded the alarm over the growing number of employers allegedly failing to pay pension contributions into retirement funds after deducting the money from employees’ salaries.
The Public Servants Association (PSA) said more than R8 billion in pension contributions had not been paid over by employers, leaving workers at risk of discovering gaps in their retirement savings only when they resign, retire or submit benefit claims.
Economists have warned that the issue could have serious consequences for workers, many of whom already face difficulty retiring comfortably even when they receive their full pension benefits.
In a statement, the PSA said it was “shocked and outraged” by reports that thousands of employers across South Africa had failed to pay over pension contributions, with arrear payments amounting to R8.3 billion.
“The PSA regards this as a gross betrayal of workers' trust and a direct attack on the financial security and dignity of employees who work with the legitimate expectation that deductions from their salaries will be paid over to their respective pension funds. Instead, many workers face uncertainty regarding their retirement savings because of the unlawful and unethical conduct of employers,” the union said.
The PSA said pension contributions were not optional payments, but deferred earnings belonging to employees.
“This situation is nothing short of a national disgrace. Pension contributions are not optional payments; they are deferred earnings belonging to employees. Any employer who deducts these contributions but fails to pay them over is effectively depriving workers of hard-earned retirement savings,” it said.
The union said many employees only became aware of outstanding contributions when they left employment, retired or lodged claims for benefits, by which time the financial impact could already be significant.
The PSA said the failure by employers to pay pension contributions undermined confidence in South Africa’s retirement system and placed families at risk of financial hardship.
It called on President Cyril Ramaphosa and government to take urgent action against employers who failed to comply with their legal obligations.
The union called for stronger penalties against employers who withheld pension contributions, including criminal prosecution where money was unlawfully withheld or misappropriated. It also called for improved enforcement, regular compliance inspections, the publication of defaulting employers and urgent recovery of outstanding contributions, including interest owed.
“Workers should not be forced to pay the price for employers who disregard the law and exploit employees’ trust,” the PSA said.
“Retirement savings represent the future security of millions of South Africans and must never be treated as a source of cash flow for irresponsible employers.”
Edwin Mkhize of Cosatu in KwaZulu-Natal said the matter was serious, adding that workers had limited options when employers failed to pay over contributions.
“Such recourse, which includes opening a criminal case against a particular company, can take a very long time,” Mkhize said.
“This is a matter of corruption and should be treated as such. We have found many conmen that are doing this; it’s not just small companies; there are big companies doing this and even municipalities.”
Mkhize said Cosatu was exploring ways to prevent problems from escalating, including ensuring workers’ interests were represented on pension fund boards of trustees.
“We cannot be reactive; we need to be proactive in addressing the issue,” he said.
He added that Cosatu had engaged with authorities on the issue, including efforts to name and shame companies that were in breach.
Economist Dawie Roodt described unpaid pension contributions as a serious problem, saying many workers trusted employers to make the payments and did not regularly check whether the money had reached their retirement funds.
“Quite often, people are not really concerned about this (pension contributions) because they trust their employers to do the payment, and people just don’t check them,” Roodt said.
“My advice to people is that they make sure that the money is paid over because when it comes to retirement and the money is not there, you have serious issues because the majority of South Africans cannot retire independently as it is, and unfortunately, some of the biggest culprits here are state-owned enterprises and especially the municipalities,” he said.
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Workers face uncertainty over retirement savings as unions warn that billions in pension contributions have not been paid over by employers.
Image: ChatGPT