FSCA ruling reshapes compliance landscape for South African pension and healthcare funds

The Financial Sector Conduct Authority’s (FSCA) recent enforcement actions have intensified scrutiny on the South African motor industry, making compliance with pension and healthcare regulations an inescapable imperative. The landmark ruling by the FSCA Tribunal has set a precedent: employers are no longer able to simply opt out of industry-administered retirement and medical funds without adhering to a formal exemption process.

“The ruling comes at a time when national compliance failures are rising sharply,” says Paulos Masemola, General Secretary of The Motor Industry Bargaining Council (MIBCO). According to a recent release from the FSCA, as of March 31, 2025, there were 15,521 employers in default across various sectors, with arrears and late-payment interest eclipsing R7.23 billion. This shortfall poses potential risks to hundreds of thousands of retirement-fund members and underscores the critical nature of the compliance challenge in South Africa.

The ruling has fundamentally reshaped the compliance landscape. Directors are now personally liable for non-contributions as per Section 13A of the Pension Funds Act. The implications of failing to meet payment obligations have escalated: what was once merely an administrative issue can now lead to criminal charges, potentially resulting in fines of up to R10 million or imprisonment.

Within the motor industry, retirement funds serve as essential components of compliance with regulatory mandates. They provide a financial safety net for workers throughout the sector. With FSCA oversight tightening, the governance of retirement and medical funds has become paramount for employers in the motor industry.

The Motor Industry Retirement Fund (MIRF) stands out as one of the largest and most stable industry-specific funds in South Africa, boasting over 232,307 active contributors and managing more than R62 billion in assets as of October 2025. Additionally, the Motor Industry Provident Fund (MIFA) offers a lump-sum provident option that maintains continuity for employees who change jobs. Motor Health Care (MHC) provides essential medical cover at agreed rates, delivering GP care, chronic medication, and basic hospital benefits to thousands of lower-income workers.

“These funds create a uniform safety net across the industry,” Masemola states. “Whether you work in a dealership, workshop, components manufacturer, filling station, or fitment centre, you benefit from consistent and reliable provisions. When employers adhere to these standards, the motor sector workforce thrives, and the entire industry becomes more robust and sustainable.”

National statistics further highlight the urgency for enhanced governance: only approximately 36% of South Africans belong to a retirement fund. For many workers in the motor industry, the retirement funds provided through their employment represent their only opportunity for structured retirement and risk benefits.

Employer compliance obligations stem from multiple agreements, including the Motor Industry Provident Fund Agreement, Autoworkers Provident Fund Agreement, Pension Funds Act, the MIBCO Main Agreement, individual fund rules, and FSCA conduct standards. These requirements emphasise the need for accurate payroll data, timely contribution payments, proper payroll reconciliation, and maintenance of valid exemption certificates.

Masemola highlights the particular challenges faced by smaller and mid-sized businesses, which often grapple with poor payroll data. “Incorrect categories, outdated salaries, or missed reconciliations can lead to arrears, incorrect benefits, unallocated payments, and delayed or unpaid claims,” he explains.

Confusion surrounding exemptions is another recurring issue. Some employers mistakenly believe that MIBCO registration allows them to choose whether to opt into industry funds. Others assume that contributing to a private fund exempts them from industry obligations. “These misconceptions are perilous,” Masemola warns. “Participation is mandatory unless an employer possesses a formally approved exemption that remains current and valid. Exemptions require renewal and must align continuously with evolving industry standards.”

For exemptions to be granted, an employer must offer an alternative fund that provides equal or superior benefits compared to the industry funds. Importantly, financial difficulties, employee refusals, or contributions made to another fund without official approval do not qualify for exemption.

“Employers sometimes believe they have the option not to contribute,” Masemola notes. “However, the application parameters are explicit. Fund agreements are applicable to all employers and employees within the sector unless a lawful exemption is in place.”

The ramifications for employees are dire. If contributions are deducted from their wages but remain unpaid, workers risk permanently losing retirement savings, incurring reduced investment growth, and facing delays or denial of benefits. This impact is especially critical for lower-income workers who often lack alternative safety nets.

“Non-compliance doesn’t just break the law; it breaks trust,” Masemola emphasises. “It jeopardises a worker’s future. We are handling people’s life savings and their financial security.”

To bolster compliance, MIBCO has intensified its education and support initiatives. The FSCA’s intensified scrutiny dovetails with MIBCO’s efforts. “We already have robust governance systems,” Masemola asserts. “We consistently refine our processes to align with FSM regulations as they change, and our partnerships with the Motor Industry Fund Administrators (MIFA) and Motor Industry Retirement Funds (MIRF) are vital in ensuring that both employers and employees receive the necessary education and assistance to adhere to industry regulations.”

Looking forward, MIBCO is dedicated to strengthening industry partnerships, expanding employer training, enhancing digital oversight, and improving monitoring tools to mitigate arrears and streamline exemption renewals.

To reinforce compliance and support workforce stability, MIBCO urges all employers to:

• Review their exemption status to ensure it is valid and current.
• Check payroll categorisation and salary accuracy to avert arrears and ensure correct benefits.
• Conduct regular reconciliations of contributions to promptly identify and correct discrepancies, alongside submitting monthly returns by the 10th of each month.
• Engage with MIBCO’s compliance support teams for guidance, training, and digital tools.

“Good governance is not an administrative burden. It is a promise to every worker in the motor industry,” Masemola says. “Protecting pensions means protecting futures. This is the standard we must all uphold.”

IOS