Misbehave and lose pension money

As much as employees have the benefit of employers making contributions towards their pension funds, employers also have a right to be compensated under certain circumstances from these benefits.

When can an employer receive your pension benefit?

A fund may deduct any amount owing by a member to his or her employer where:

Wrongdoing by the member

Theft: A crime where the member unlawfully and intentionally takes possession of any asset.

Fraud: A crime where the member makes a misrepresentation to his employer or the employer's clients and/or customers, with the intention to cause the victim of fraud to act to their detriment.

Misconduct: The employer would need to prove that the member acted intentionally.

Dishonesty: The employer will have to prove that although the member did not commit theft or fraud or misconduct, the conduct of the member caused the employer to suffer loss (e.g. where an employee who is required to report a suspicious transaction to his employer does not do so in return for a bribe).

Admission of liability

It is important for the member's written admission of liability to be clear and explicit and should specifically allow for deductions to be made in respect of wrongdoing committed against the employer. Only if a valid admission of liability is received can a fund compensate the employer.

Judgment against member

In some cases, the employer may decide to obtain judgment against the member.

If the judgment is granted, the employer will have to ask the court for a compensation order in terms of section 300 of the Criminal Procedure Act, failing which the fund will not compensate the employer.

What is not allowed as a basis for deduction?

A fund cannot make a deduction from a member's benefit if the amount owed by the member to the employer is in respect of contractual debt such as loans or bursaries in respect of which the member still owes a balance on the date when he or she exits the fund.

Can payment be withheld during an investigation ?

The employer may request the fund to withhold payment of a member's benefit to have the opportunity to investigate its loss suffered on account of the member's wrongdoing and/or to pursue legal action against the member. The fund may withhold the portion of the member's benefit that the employer intends to claim. In terms of cases decided by the Pension Funds Adjudicator, it has been established that a fund may not withhold payment for not more than 2 years.

This article was brought to you by Liberty. For more information call (011)408-2999 or e-mail contact@liberty.co.za