<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JEREMY MAGGS: Can your pension money be frozen before you have been convicted of any crime? Let me give you the background, a former Robben Island Museum chief financial officer (Karabo Ramela) has lost a bid to have a withdrawal benefit of around R390 000 released after his employer alleged that he misrepresented his professional status when applying for the job.<\/p>\n
Read:\u00a0Former Robben Island Museum CFO loses bid to access pension payout<\/p>\n
Now, the Pension Funds Adjudicator, Lebogang Mogashoa, found that there was enough initial evidence of possible dishonesty to justify withholding the benefit while legal processes continue. The ruling did not find the former employee guilty of fraud or confirm the employer\u2019s claimed losses.<\/p>\n
Let\u2019s explore this in a little more detail. Lebogang, a very warm welcome to you. So explain to us in simple terms, how can a pension fund freeze someone\u2019s money before a court has found the person guilty?<\/p>\n
LEBOGANG MOGASHOA: Thank you, Jeremy, and thank you for the opportunity. Jeremy, I think the point of departure should be that your retirement savings that you save in a retirement fund are safeguarded from being pursued by your creditors or anyone who claims to have a claim against you.<\/p>\n
The law says that they cannot pursue your pension benefit because it\u2019s protected. But in the same breath, the law does say that in certain circumstances it is allowed for someone who has a claim against you, such as your employer, to pursue recovery from your pension for damage they may have suffered as a result of your conduct. So that\u2019s the legal provision.<\/p>\n
From that, the law says that the employer, whoever has a claim against you, if it\u2019s the employer, the employer cannot recover the loss that they suffered or they allege to have suffered from a pension, except if they obtain a judgment of court that determines that you\u2019re liable to compensate them, or if you\u2019ve written down or acknowledged liability to the employer in writing.<\/p>\n
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This is where the issue of freezing the pension comes in now, because usually these legal processes, whether trying to get an acknowledgement of liability or trying to get liability determined by the courts, can take years and years.<\/p>\n
So the law allows a pension fund to then withhold the money that you have in your pension pending the outcome of those proceedings\u2026 This is exactly what is happening here. The employee\u2019s pension has been frozen because there are legal proceedings that are unfolding to determine their liability to the employer.<\/p>\n
Read:
Employers owe R8.3bn in pension contributions \u2013 FSCA
Pension fund ordered to pay two-pot withdrawal benefit
Why you won\u2019t always have the final say on how your pension is distributed<\/p>\n
\u00a0JEREMY MAGGS: In pure legal terms, though, Lebogang, does that not undermine the presumption of innocence?<\/p>\n
LEBOGANG MOGASHOA: It doesn\u2019t, because, as you correctly pointed out when you introduced this matter, the withholding of the benefit does not mean that the employee has been found guilty. It just says that the employer has provided sufficient initial evidence that there might have been wrongdoing and that it might have a valid claim and, therefore, we are keeping the money\u2026<\/p>\n
We are freezing the money, we\u2019re not paying it out so that in the event that it is determined that the employee is liable to the employer, then the employer has an option to recover it from the pension. So it\u2019s not a presumption that the employee is guilty of anything.<\/p>\n
JEREMY MAGGS: Let me ask you about determination then. What level of evidence would an employer have to produce before a fund could withhold a benefit?<\/p>\n
LEBOGANG MOGASHOA: In legal terms we call it prima facie evidence. In simple terms it just means that present credible, believable evidence, not necessarily conclusive evidence, but believable. It must be believable on the face of it, that the employer has suffered loss as a result of theft, fraud, dishonesty or misconduct.<\/p>\n
It\u2019s very important that I clarify for the listeners that it\u2019s not carte blanche for the employer, the employer is not entitled to recover money from a pension for just anything.<\/p>\n
It must be for loss suffered as a result of theft, fraud, dishonesty or misconduct. The courts have said that the misconduct that\u2019s envisaged in that section that we\u2019re referring to is one that has an element of dishonesty.<\/p>\n
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So it\u2019s not just the general misconduct. There must be dishonesty and there must be believable evidence that it might have caused the employer loss.<\/p>\n
JEREMY MAGGS: In this particular case that I referenced, is there a line between an inaccurate CV (curriculum vitae) and deliberate fraud?<\/p>\n
LEBOGANG MOGASHOA: Yes, there is a clear connection in this matter because essentially what the employer was saying is that the employee misrepresented their qualifications. They said they were a chartered accountant, and they were saying that the qualifications for this job that had been advertised, which the employee applied for, required a chartered accountant registered with Saica (South African Institute of Chartered Accountants).<\/p>\n
Therefore, the employee misrepresented their qualifications.<\/p>\n
They were then appointed, they were paid salaries on that basis and there were issues around the quality of the work that the employee had done, and the issues that arose around compliance, irregular expenditure and so on that arose there. So there\u2019s clearly a line that the employee is alleged to have misrepresented their qualifications, and that qualifies as dishonesty under section 37D, as the determination says.<\/p>\n
JEREMY MAGGS: And how long would the benefit have to be frozen before the delay becomes unfair?<\/p>\n
LEBOGANG MOGASHOA: It\u2019s not an immutable period. There\u2019s no fixed period that says a benefit must be withheld for this long, and beyond that, it becomes unreasonable. What the trustees need to do is to make sure that they follow up with the employer and make sure that the employer pursues its case without any delay.<\/p>\n
Because if there are delays in the prosecution of whatever claim the employer claims to have against the employee, and those delays can be pinned on the employer, then to continue to withhold the benefit then becomes unfair to the employee. Then in those cases, the benefit might have to be released.<\/p>\n
But if the employer is doing all it can to expedite the resolution or the prosecution of the claim, then that benefit can be withheld until the determination or the outcome of the proceedings.<\/p>\n
JEREMY MAGGS: Is there anything that prevents an employer from using a pension freeze as leverage in a labour or a personal dispute?<\/p>\n
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LEBOGANG MOGASHOA: Yeah, absolutely. So the way the law is framed \u2013 the relevant section is section 37D of the Pension Funds Act \u2013 the way it\u2019s framed ensures that it\u2019s not carte blanche. So the employer cannot just say because I have a personal grievance against this employee, I\u2019m just going to withhold. The requirements for the withholding are very clear.<\/p>\n
The law says that there must be a loss. So the employer has to show that, at least, there\u2019s evidence that it has suffered some loss and that that loss arose as a result of the employee\u2019s theft, fraud, dishonesty or misconduct.<\/p>\n
And this is where a lot of claims collapse, by the way, because the employer withholds for something else that\u2019s not theft, fraud, dishonesty or misconduct.<\/p>\n
There are cases where we found that the reasons for withholding were unlawful and therefore ordered the release of the money. But, as long as the employer can show that there\u2019s been loss and that it arises from theft, fraud, dishonesty, misconduct, then that withholding would be lawful.<\/p>\n
JEREMY MAGGS: And just the final one, what warning do you think this ruling sends to employees, employers and retirement funds who might be handling similar disputes?<\/p>\n
LEBOGANG MOGASHOA: I think the most important message from this determination is that, as I said, there must be loss that arises from theft, fraud, dishonesty or misconduct. But the scope of what qualifies as theft, fraud, dishonesty or misconduct is something that is quite interesting and it\u2019s not always clear.<\/p>\n
As far as I can recall, I\u2019ve not seen a case, at least since I\u2019ve been at the Pension Funds Adjudicator, where the fraud or the dishonesty that is alleged by the employer or the fund is in relation to qualifications.<\/p>\n
So the important thing is that lying about your qualifications will not only cost you your career, but it can also cost you your pension, depending on the other facts and circumstances of the case.<\/p>\n
JEREMY MAGGS: Thank you very much indeed. That is Lebogang Mogashoa, who is the Pension Funds Adjudicator.<\/p>\n
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