• Rama Govenden, Independent Trustee

Is our retirement fund monies safe with this rampant corruption?

All the commissions (Zondo, Nugent, and Mokgoro etc.) that have been unfolding at a dizzying pace coupled with our amazingly courageous journalists have exposed in graphic detail the extent of theft, fraud and corruption that has and is taking place in the public sector (and one can assume in the private sector as well.)

How have we become so rotten? The Agrizzi revelations indicate that the corruption began well before the Zuma era, and stretches back to the 90’s.It seems that it flourished without the blessing of government or did it turn a blind eye? Zuma clearly legitimated it as he tried to steal the crown jewels in a major way with the help of his friends. Guptas were major players however there were many other people involved, especially businessmen who saw a very quick way of getting rich. In South African, corruption has its own local lingo. “We must eat “means that people want a share of the spoils. It is clear corruption knows no colour nor race nor creed – unlike many other spheres of our society where race still pays a huge role. It is enough to make the most patriotic citizen become despondent and disillusioned about the future prospects for our young country.

Given this sorry state of affairs, are our pension fund monies safe? We are fortunate to have very forward thinking legislation and regulation. National Treasury, despite the concerted attacks on it by Zuma and his team, have been world class, enacting a framework to protect the financial services, and importantly pension fund savings of members. The Pension Funds Act of 1956 and subsequent related amendments and regulation have ring-fenced member monies. Neither the government nor sponsoring companies nor are trade unions able to access these pots of monies. No doubt corrupt trustees, administrators or sponsors may plunder monies, especially if there is collusion (like the Fidentia and Ghavalas cases), however these are exceptions. The vast majority of funds are not affected in this way. Our regulator the FSCA has had a strong arsenal of legislation to deal with corruption, and it has played a reasonably effective role in protecting member interests.

Legislation is prescriptive and understandably so as far as member monies are involved. It prescribes the nature, calibre and experience of trustees, what they could and could not do, and demand proper governance of the funds. Proper records are needed to be kept, clear protocols to appoint service providers (administrators, investment managers, auditors, actuaries), audited annual financial statements are compulsory, and most funds are required to do valuations once in 3 years. The member is able to complain to the FSCA on issues and also can take up issues with the Pension Fund Adjudicator a free service to address member disputes/complaints. The Financial Institutions (Protection of Funds) Act further safeguards the funds and allows the regulator additional recourse to address errant players in this space. Regulation 28 which clearly specifies the maximum proportions of investments in the different asset classes etc. especially in the riskier ones, prescribes investment limits in foreign countries, inter alia. It importantly also limits investments in the business of the specific employer concerned to 5% (and with application up to 10%) to manage risk. In Enron many employees were fully invested in company shares, with the result that when the company went bust, the members lost all their monies, in addition to their jobs. Therefore this is an important protection for members.

The ANC in its manifesto talks about “prescribed assets” in other words the law to prescribe where a proportion of fund assets are invested. This is motivated to assist the funding of infrastructural and other projects to grow the economy. It was implemented pre – 1994 and it remains to be seen whether it achieves its stated objectives. It is, however a worry for members as to whether acceptable returns are obtained on these investments.

The new dawn of President Ramaphosa hopefully represents a new beginning where corruption is dealt with in a meaningful way, where the culprits face the full might of the law and where stolen monies are returned to the state to be used for legitimate purposes like uplifting the poor.

In short, I believe that member’s funds are protected by stringent legislation and regulation. The biggest risk to members’ money is apathy, where members in most cases take little or no interest in their funds, resulting in poor understanding of their rights, benefits and duties and it is up to the members to ensure their trustees are accountable to safeguard their interests and monies in the best possible way.


Rama Govenden, an ex -HR Executive for more than 15 years has substantial experience in the retirement funding space as principal officer and trustee in many diverse funds. If you would like to respond to the article please use email address: ramagovenden27@gmail.com