• Leanne van Wyk, Director - ICTS Legal Services

Retirement funds and Covid-19: payment of contributions and rules options

When employers or employees are financially distressed there are a number of options as regards making contributions towards retirement benefits. I have not set down all the options, just those that seem to have been more prevalently considered. The options available to you may also be suggested by what is already provided for in your fund’s rules. This article has a legal slant and fund boards should speak to their advisors about their options. Employers reading this article should also know that the options will depend not only on the rules of the fund but what the board of the fund may decide.

Liability for contributions

Contributions to funds are dealt with in section 13A of the Pension Funds Act (the Act) which requires an employer to pay any contributions which, in terms of the rules of the fund, must be deducted from the employee’s remuneration, and any contribution for which the employer is liable in terms of the fund’s rules. Fund contributions must be paid by no later than seven days after the end of the month for which the contributions are due.

It is important to note that non-compliance with this section by any person, including employers and directors, is a criminal offence that could give rise to a fine (up to R10 million) and / or imprisonment on conviction. Every director of a company ‘who is regularly involved in the management of the company’s overall financial affairs’ will be personally liable for the company’s payment of contributions and compliance with section 13A.

Thus, careful consideration needs to be given to altering the payment of fund contributions to avoid criminal liability or contravention of the Pension Funds Act (the Act).

Note: any contributions that have been deducted from remuneration must be paid over to the fund.


The most desirable option, from a retirement funding point of view, is to continue to make contributions to the fund at the same rate as previously. I have not dealt with this option as not much needs to be done.

It is also desirable that risk benefit premiums and fund expenses are paid. However, it may be that this is not an option, depending on the level of financial distress of employers and employees.

Options include:

  • Option 1: suspend contributions to the fund altogether for a period;

  • Option 2: make partial contributions to the fund;

  • Option 3: change what is included in pensionable salary or the percentage of pensionable salary contributed.