Personal Liability For Retirement Funds Defaults – A Clear Warning

By Imraan Mahomed and Thato Makoaba

This trend reflects an important and overdue shift in judicial approach, one that empowers trustees of pension funds to act decisively. Trustees should not hesitate to invoke the statutory protections under section 13A of the PFA and related provisions when employers default on their obligations. Courts are now actively enforcing these obligations against defaulting individuals, doing so with increasing regularity and force.

The Enforcement of Section 13A

The legal foundation for this accountability is clear. Section 13A imposes a strict duty on employers to pay both employee and employer contributions in full, within seven days after the end of the month in which the contributions are due. Crucially, it also creates personal liability for individuals “regularly involved in the management of the employer’s overall financial affairs”—a category that includes directors, members of close corporations, and financial officers in public entities. In the event of non-compliance, interest is payable, and funds are obliged to pursue the recovery of outstanding contributions to protect the retirement savings of employees.

The importance of compliance with these provisions has been acknowledged at the highest levels of government. In the Financial Sector Conduct Authority (“FSCA”) latest 2025 annual report, Finance Minister Enoch Godongwana stated that the FSCA has been focusing on ensuring that employers fulfil their obligations to pay over their employees’ retirement fund contributions. He emphasised that “the timely payment of employee retirement fund contributions by employers is crucial for securing the financial security and stability of employees upon retirement.” Documents from the Parliamentary Monitoring Group underscore the scope of the problem, revealing that at least 30 municipalities have owed SALA contributions for two years or more—an indication of the widespread and systemic nature of the problem in the public sector.

Recent court decisions confirm that the personal liability provisions of the PFA are far from academic. In Engineering Industries Pension Fund & Another v Installair (Pty) Ltd (In Liquidation) & Others (1633/2023) ZAWCHC 8 (16 January 2025), the court held the directors of a company personally liable for outstanding retirement fund contributions, together with interest. The court firmly rejected arguments that the directors could escape liability by citing ignorance, non-involvement, or financial constraints. It made clear that the obligation to pay pension contributions is statutory and non-negotiable.

In Municipal Workers’ Retirement Fund v Mafube Local Municipality & Others 2 All SA 274 (FB) (17 January 2025), the court held the municipal manager, chief financial officer, executive mayor, and administrator personally liable for more than R14 million in unpaid pension contributions. The judgment further reinforced the point that failure to pay deducted pension contributions constitutes both a civil wrong and a criminal offence under section 37 of the PFA, which provides for penalties of up to R10 million, imprisonment for up to 10 years, or both.

In addition to judicial enforcement, the regulatory framework under the PFA provides significant powers to the FSCA. The FSCA can vary, suspend, or revoke the licences of retirement funds; impose administrative penalties; refer matters to the South African Police Service for criminal prosecution; and even remove board members. If a directive from the FSCA is ignored, the Authority has the power to impose fines of up to R15 million or imprisonment not exceeding 10 years, or both.

Proposed BCEA Amendments Strengthen Parallel Enforcement

These developments are not occurring in isolation. Recent draft amendments to the Basic Conditions of Employment Act (BCEA) reinforce the seriousness of compliance by aligning its provisions with those of the PFA. The draft amendments propose that an employer’s failure to pay a contribution to a benefit fund on behalf of an employee be treated in the same way as the failure to pay wages or other amounts due to the employee. This adjustment would bring such matters within the jurisdiction of the Labour Court, the CCMA, and Bargaining Councils—fora historically excluded from hearing pension-related claims, which were previously reserved for the Office of the Pension Fund Adjudicator.

Conclusion

Together, these legal and regulatory shifts should embolden trustees of retirement funds. The courts have made it clear that they will support actions taken to recover unpaid contributions, and the FSCA has extensive tools at its disposal to compel compliance.

Trustees should not hesitate to assert claims directly against directors and officers, especially in cases where contributions are consistently delayed or withheld.

The evolving judicial posture confirms that compliance with pension fund obligations is no longer a matter of administrative discretion. It is a fiduciary imperative.

When employers fail to make pension payments, they do more than violate statutory obligations. They compromise the long-term financial well-being of their employees and undermine the trust that underpins the entire retirement system.

The message is now unmistakably clear: pension contributions are sacrosanct, and those responsible for ensuring their payment will be held accountable through both judicial and regulatory mechanisms.

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