Your employer is entitled, under certain conditions, to claim all or part of your retirement benefit as compensation for fraud, theft or dishonesty on your part.
The Pension Funds Act includes provisions designed to protect your retirement benefit from being reduced or attached once you retire or resign from your fund. However, there are circumstances in which a retirement fund can make deductions from your withdrawal benefit before paying you the balance. One circumstance is if your employer needs to be compensated because of theft, dishonesty, fraud or misconduct committed by you and it is proved in court or admitted by you.
Earlier this year, a former member of the Auto Workers’ Provident Fund, BG, complained to the Pension Funds Adjudicator because the fund had paid his withdrawal benefit to his former employer. Moore Road Gas, a close corporation (CC) in Durban, which dismissed BG in June 2012 because he had allegedly committed fraud or theft.
Moore Road Gas instructed the provident fund to withhold BG’s withdrawal benefit in lieu of damages of about R427 000, which, according to a forensic audit, it had incurred as a result of BG’s alleged misconduct. The fund paid BG’s benefit of R82 098 (after tax of R7 990) to Moore Road Gas.
In her determination. the adjudicator, Muvhango Lukhaimane, says the rules of the Auto Workers’ Provident Fund provided for the fund to withhold a member's benefit pending the outcome of a criminal charge against the member.
Moore Road Gas laid a criminal charge against BG after he had been dismissed, the determination says.
In his complaint, BG said he had appeared in court in August 2012, but the case had “been withdrawn” because of lack of evidence. He said the court had been unable to provide proof of the outcome of the case and had referred him to the police, who had told him that the matter was still under investigation.
Lukhaimane referred to a 2001 determination that held that the following requirements must be met before a deduction can be permitted:
* An amount must be due by a member to his or his employer;
* The amount must be due at the date of retirement, or the date on which the member ceases to be a member of the fund;
* The amount must be in respect of compensation payable for damage caused to the employer, or legal costs recoverable from the member;
* The damage caused to the employer must be by reason of theft, dishonesty, fraud or misconduct by the member; and
* The member must have furnished a written admission of liability to the employer in respect of the compensation, or judgment must have been obtained against the member in a court.
The provident fund provided the adjudicator’s office with a letter in which BG admitted liability for the losses incurred by Moore Road Gas and authorised the fund to pay the proceeds of his withdrawal benefit to the CC as compensation. The letter bore BG’s signature.
But in his complaint, BG disputed that he had signed the admission-of-liability letter.
Lukhaimane says her office compared the signature on the letter admitting liability to the signature on BG’s letter of complaint, and the signatures were “very similar”. If the signature on the admission-of-liability letter was not BG’s, then Moore Road Gas had committed fraud and forgery, which the adjudicator found “strange and unlikely”, Lukhaimane says.
Her office could not find “a compelling reason” for Moore Road Gas to falsify a document and claim that it was signed by BG. She dismissed the complaint, saying the fund had acted within the parameters of the Act when it deducted the benefit.