Employers’ Right To With-Hold Your Pension Benefits

Eleanore Hiralall | Attorney – Legal Division

Saving towards one’s retirement goal is a long steadfast journey which requires patience and determination to stay focused and committed to your retirement plan.  

Imagine after years of dedicated service, when you need it the most, you are told that you are not entitled to your hard-earned pension benefits as it is being with-held by your employer?

Understanding the implications of 37 D of the Pension Fund Act 24 of 1956 (“the Act”) and the recent judgment of ABSA Bank Limited v Deputy Pension Funds Adjudicator and Others PFA 69/2021, will provide a better understanding on when your employer can rightfully with-hold your pension benefits.

Section 37 D of the Pension Funds Act 24 of 1956 (“the Act”)

In terms of Section 37 D, particularly sub section (1)(b)(ii), an employer can (but not limited to) for reasons of theft, dishonesty, fraud or misconduct conducted by an employee, deduct any amount due from the employees’ pension fund to satisfy any damages suffered by it.  The below judgment particularly dealt with this issue.

Case Law

In a recent judgment between ABSA Bank Limited v Deputy Pension Funds Adjudicator and Others PFA 69/2021 (12 October 2022), the Financial Services Tribunal ruled that in instances where a judgment was in place against the member of a fund, Section 37D could be exercised in order for the employer to deduct the amount in damages suffered by it from the members Pension / Provident Fund benefit.

Summary of case

Ms Ndlondlo (“the member”) was employed by ABSA Bank Limited and was a member of the ABSA Pension Fund (“the Fund”).  On 17 January 2020 the members employment was terminated to due alleged fraudulent activities conducted by the member.

When making a request for withdrawal of her Pension benefit, the member found out that she could not make a withdrawal. She lodged a complaint with the Pension Funds Adjudicator on the basis that she was not notified her benefits were being with-held and that she was not notified of the reasons thereof.

Investigations revealed that the member unlawfully disclosed confidential account information of two (2) of ABSA’s clients to a third party, which disclosure resulted in funds being stolen from the said clients’ accounts, resulting in ABSA suffering a loss in excess of R 79 million, justifying their grounds to with-hold her benefits.

Had the member not breached her employment contract by acting unlawfully and sharing confidential client information, the funds in the clients’ accounts would not have been stolen and ABSA would not have suffered any financial loss.

ABSA was successful in obtaining judgment against the member which allowed it to exercise the provisions of Section 37 D of the Act.

Learnings from this case

As employers are permitted in terms of legislation to withhold/deduct any amount due from an employees’ pension fund to satisfy any damages suffered by it, as was clearly evident in the recent judgment, it is important that you familiarize yourself with the provisions of Section 37 D(1)(b)(ii) of the Act to fully understand your rights including the rights available to an employer to with-hold / deduct your lifetime savings upon retirement.

Of equal importance to note is that there are also other conditions (other than theft, dishonesty, fraud or misconduct) that would justify the with-holding / deduction of your pension funds by an employer. In addition to the above, an employer is also entitled to withhold/deduct your benefits in terms of a court order or in instances where there is a signed admission of liability by you. Employees are therefore encouraged to familiarize themselves with the provisions of the Act.