South Africa’s pension industry is confronting a rising challenge as thousands of employers fail to remit worker contributions to retirement funds.

A new report from the Financial Sector Conduct Authority (FSCA) shows that arrears climbed 40% to 7.29 billion rand in the 15 months to March 2025.

Nearly 600,000 workers have been affected, many discovering the issue only when trying to access savings under the recently introduced two-pot pension system.

With the number of non-compliant employers almost doubling to 15,521, regulators are now preparing legal reforms that will expand their supervisory powers over retirement contributions.

Bill to bring stricter pension fund oversight

The FSCA said the planned Conduct of Financial Institutions Bill will extend its authority to include employers who deduct contributions from salaries but fail to transfer them to funds.

FSCA Commissioner Unathi Kamlana confirmed that the bill is expected to change the compliance landscape within the next 18 to 24 months.

Under the current framework, the regulator does not have direct power to act against employers, which has limited its ability to respond quickly to arrears.

The arrears have grown in tandem with a rise in reported cases. A total of 15,521 entities are now recorded as having defaulted, affecting contributions across 67 retirement funds.

According to a Bloomberg report, this failure to remit not only undermines fund sustainability but also places financial strain on employees who rely on these savings for their long-term security.

Motor and private security sectors dominate arrears

The report noted that the highest number of non-compliant employers came from the motor industry and the private security sector.

The inclusion of the Auto Workers Provident Fund and the Motor Industry Provident Fund in the review expanded the scope of identified arrears, adding to the overall rise. The funds did not respond to requests for comment.

The FSCA emphasised that when deductions are taken from salaries but not transferred, the practice can amount to financial misconduct or even fraud.

It warned that the trend has serious consequences, from eroding trust in the retirement system to depriving employees of benefits they are entitled to access.

Two-pot system exposes hidden arrears

The two-pot pension system, introduced in September 2024, allows workers to withdraw a portion of their retirement savings before retirement age.

However, as employees began to apply for withdrawals, many found that their employers had failed to make regular contributions. This exposure of unpaid contributions highlighted the extent of the problem and prompted closer regulatory scrutiny.

According to Kamlana, the FSCA is preparing to act more decisively once the Conduct of Financial Institutions Bill becomes law.

The legislation is designed to ensure that employers are held accountable for pension contributions, thereby strengthening protection for South African workers.

Rising arrears add pressure on reforms

With arrears now at 7.29 billion rand, the FSCA faces growing pressure to implement reforms that will secure the retirement savings of nearly 600,000 affected workers.

The regulator’s stance reflects a broader concern that pension arrears may destabilise confidence in the retirement system if left unchecked.

Employers across multiple industries are now under heightened scrutiny, and the coming legislation is expected to introduce severe consequences for those who fail to comply.

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