Retirement & Pension Fund Laws in South Africa: Employer Responsibilities

Planning for retirement is essential, and South African law sets clear guidelines for employers who provide pension and retirement funds for their employees. While it is not always mandatory for businesses to offer these benefits, those that do must follow strict regulations under the Pension Funds Act (PFA) and the Financial Sector Conduct Authority (FSCA).  

Whether you’re an employer setting up a pension fund or an employee seeking clarity on your rights, this guide breaks down everything you need to know.  

Are Employers Required to Offer a Retirement Fund? 

Employers are not legally required to provide a pension or retirement fund unless:  

✅ It is specified in an employment contract or company policy.  
✅ It is part of a bargaining council agreement for a specific industry.  
✅ It is a requirement in certain sectors, such as construction or mining.  

While not compulsory for all businesses, offering retirement benefits attracts and retains employees, improving workplace morale and long-term financial security.  

Employer Responsibilities for Retirement & Pension Funds 

If an employer chooses to provide a retirement fund, they must ensure compliance with legal and administrative requirements.  

 1. Choosing the Right Fund   

Employers can either:  

• Join an industry retirement fund, such as those required in certain trades.  

• Set up a company-specific pension or provident fund.

All funds must be registered with the FSCA and adhere to Pension Funds Act regulations.  

 2. Employer & Employee Contributions   

Both employers and employees contribute to retirement funds.  

💰 Employer Contribution: Typically 5% – 15% of an employee’s salary.  
💰 Employee Contribution: Deducted from wages as per the fund agreement.  

Employers must ensure timely payments to avoid legal issues and safeguard employees’ retirement savings.  

 3. Deducting & Paying Contributions   

Employers must:  

✔ Deduct the agreed percentage from employees’ salaries.  
✔ Submit both employer and employee contributions to the fund.  
✔ Keep accurate payroll records for compliance.  

Failure to pay contributions on time can result in penalties, FSCA investigations, and lawsuits from employees.  

 4. Informing Employees About Their Benefits   

Employers must provide employees with:  

📌 Clear information about the retirement fund’s rules, contributions, and benefits.  
📌 Annual statements showing their savings and expected retirement payouts.  
📌 Guidance on what happens if they resign, retire, or get retrenched.  

Transparent communication ensures employees understand their rights and options.  

 5. Complying with Governance & Legal Regulations   

Employers must ensure their retirement fund follows:  

✅ FSCA requirements, including proper fund management.  
✅ Tax compliance under the Income Tax Act.  
✅ Regular reporting and audits to prevent mismanagement.  

Failing to comply can result in financial penalties, fund deregistration, or legal action.  

What Happens When an Employee Leaves the Company? 

When an employee resigns, retires, or is retrenched, they do not lose their retirement savings. Instead, they have several options:  

🔄 Transfer the funds to another retirement account.  
💰 Withdraw the funds, subject to tax deductions.  
📅 Keep the funds invested until retirement age.  

Employers must guide employees through the correct withdrawal or transfer process according to fund rules.  

Consequences of Employer Non-Compliance   

Neglecting pension fund responsibilities can lead to:  

❌ Legal action from employees.  
❌ FSCA penalties for non-payment.  
❌ Damage to company reputation and employee trust.  

Employers must take retirement fund compliance seriously to avoid costly disputes.  

Final Thoughts: Ensuring Compliance & Employee Security   

While not always mandatory, retirement funds are a valuable employee benefit that enhances job satisfaction and financial stability. Employers who offer these funds must comply with South African law, submit contributions on time, and keep employees informed about their benefits.  

Need Expert Guidance on Compliance?   

We assist businesses navigate labour law compliance with tailored solutions.  

Contact us today for expert support in managing pension responsibilities and ensuring compliance!