Can an employer lawfully withhold an employee’s retirement fund benefit when fraud or theft is alleged – but not yet proved in court? This was the question at the centre of a recent ruling by the Financial Services Tribunal (FST), which examined whether disciplinary findings or pending civil and criminal proceedings are sufficient grounds for such action.
In decision this month, the Tribunal confirmed that withholding benefits is permissible, but only within strict limits. Under section 37D(1)(b)(ii) of the Pension Funds Act (PFA), a fund may generally withhold or deduct a member’s benefit only if the member has either admitted liability in writing or a court judgment has been obtained.
However, legal precedent, particularly the Highveld Steel and Vanadium Corporation Ltd v Oosthuizen (2008) decision, allows funds temporarily to withhold benefits pending the conclusion of civil or criminal proceedings if there is a prima facie case of fraud, theft, or misconduct, and the employer is actively pursuing recovery.
The case also clarified what is not sufficient. Internal disciplinary findings or unproven allegations on their own cannot justify the permanent withholding of benefits.
The Visser case
The dispute involved Hendrik Visser, a former employee of Shoprite Checkers (Pty) Ltd. Visser worked at Shoprite from 1 January 1999 until his dismissal on 21 June 2018. His termination followed a disciplinary hearing in which he was found guilty of gross dishonesty.
After his dismissal, Shoprite requested the Retail Provident Fund to withhold Visser’s benefit of R2 158 393.26, citing both Rule 16.4(1)(c) of the fund and section 37D(1)(b)(ii) of the PFA. These allow deductions or withholding in cases involving theft, dishonesty, fraud, or misconduct, provided the member has admitted liability in writing or a judgment has been obtained.
In 2019, Shoprite issued civil summons in the High Court against Visser and several co-defendants, alleging they had colluded to implement a fraudulent scheme designed to generate illegitimate payments, the proceeds of which were distributed among various entities and individuals. Criminal proceedings were also instituted.
Shoprite’s total claim against Visser and the other defendants amounts to R33 163 772, with many current and former employees cited as jointly and severally liable.
Among those implicated was Shoprite’s information technology manager. In correspondence with the Pension Funds Adjudicator, Visser admitted in April 2025 to receiving R220 000 for “bookkeeping services” performed after hours – an arrangement allegedly linked to a dispute over a low salary increase.
During a disciplinary hearing in May 2018, Visser reportedly admitted under oath that he had received a R10 000 monthly bribe from a superior to participate in the unlawful scheme.
Based on this evidence, the fund exercised its discretion to withhold Visser’s benefits pending the outcome of the ongoing civil and criminal proceedings.
Visser’s challenge
Visser lodged a complaint with the PFA, arguing that the withholding of his benefits was unlawful. He contended that disciplinary findings and pending proceedings did not meet the legal requirements of section 37D(1)(b)(ii), because he had neither admitted liability in writing nor had a judgment been obtained against him.
He also claimed that the prolonged withholding had caused him severe financial hardship, forcing him to sell his home and personal assets at reduced prices. Visser requested that the Adjudicator release his provident fund benefits and award compensation for the hardship endured.
The Adjudicator’s findings
In a determination issued in July 2025, the Adjudicator examined whether the fund was justified in withholding Visser’s benefits. Although the Act’s plain wording requires a written admission or judgment, the Adjudicator relied on the Highveld Steel precedent, which allows a purposive interpretation.
The Adjudicator noted that:
- Section 37D’s purpose is to protect employers’ rights to recover misappropriated funds.
- Dishonesty is often discovered only at termination, before a judgment can be secured.
- A literal interpretation would render employer protection meaningless, contrary to legislative intent.
The Adjudicator concluded that the fund had exercised its discretion lawfully and properly, considering both the evidence provided by Shoprite and the potential prejudice to Visser. His complaint and request for compensation were dismissed.
The Tribunal’s decision: balancing employer rights and member hardship
The FST emphasised the tightrope retirement funds walk when deciding to withhold benefits. It pointed out that Visser’s complaint was dismissed only after disciplinary proceedings were completed and criminal and civil cases had been launched against him, with efforts made to prioritise the litigation.
The Tribunal highlighted that the legal action extended beyond Visser, involving other current and former Shoprite employees. It also noted that during the May 2018 disciplinary hearing, Visser had admitted under oath to receiving a monthly bribe from a superior. Taken together with the civil and criminal claims, the Tribunal said this provided a clear and compelling basis for the fund to withhold his benefit.
Although acknowledging that Visser faced potential financial hardship, the Tribunal said the fund had to balance his interests against Shoprite’s right to recover losses. It found that the fund had acted properly and within its discretion, given the strength of Shoprite’s case and the unchallenged allegations of dishonesty.
The Tribunal concluded that the Adjudicator’s dismissal of Visser’s complaint was justified, and the fund’s decision to withhold his benefits was lawful, reasonable, and procedurally fair.
The application for reconsideration was dismissed, confirming the Adjudicator’s ruling in full.
The ruling highlights a critical principle for both employers and retirement funds: benefits cannot be withheld as a punitive measure without a clear legal basis.
For employers, it underscores the importance of pursuing formal legal action to recover losses from alleged misconduct. For retirement funds and advisers, it reinforces that section 37D is an exception, not the rule, and procedural fairness must guide all withholding decisions.
