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Potchefstroom Electronic Law Journal/Potchefstroomse Elektroniese Regsblad

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Liability to pay retirement benefits when contributions were not paid to the retirement fund

Motseotsile Clement Marumoagae

Abstract


This article addresses the conduct of employers who are associated with retirement funds, who have failed to pay their employees' contributions into such retirement funds. In particular, the article responds to the critique levelled at the approach adopted by both our courts and the office of the Pension Funds Adjudicator when adjudicating complaints from retirement fund members whose retirement funds have refused to grant them retirement benefits on the basis that their employers had not paid their contributions into such retirement funds. It has been argued that the office of the Pension Funds Adjudicator blindly enforces the retirement fund rules which prohibit payment of retirement benefits to retirement fund members whose contributions were not received by their retirement funds. Further that the ideal position would be for these retirement funds to provide their members with retirement benefits when they exit such funds, notwithstanding, the non-payment of their contributions by their employers into such funds. The argument advanced in this paper is that this critique is totally ignorant of the manner in which defined contribution funds, in particular, are designed and managed in that, should retirement funds be forced to pay out retirement benefits in circumstances where they did not receive their members' contributions, such payments would affect the financial viability and sustainability of the funds. The article argues that the criticism against the Pension Funds Adjudicator's approach is unfounded, and also that it is the employers and not the retirement funds that should be liable to make good on the loss suffered by retirement fund members if the contributions were not paid into their respective retirement funds.


Keywords: Retirement funds; contributions; Defined benefit fund; Defined contribution fund; Pension Funds Act; Pension Funds Adjudicator; Board of management.
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