5 good reasons to grant your staff access to a Group Pension or Provident Fund

– Letlhogonolo Lesiba (Director, Cornerstone Employee Benefits)

Group Pension and Provident Funds are not only beneficial to employees. Employers can enjoy just as many benefits from providing Group Retirement Schemes to their valued staff. Yet sadly, many small to medium enterprises are unaware of the value a Group Pension or Provident Fund can bring to the lives of their employees and their families. Here are five good reasons to grant your staff access to a Group Pension or Provident Fund.

  1. It protects the company against employee fraud or damages

Section 37D of the Pension Fund’s Act, permits certain deductions from a member’s Retirement Fund benefit. This includes damages caused to the employer by the employee due to theft, fraud, dishonesty or misconduct. Deductions can be made by the employer provided that:

  • The member has admitted liability in writing to the misdemeanour, or
  • Judgment has been obtained against the member in a court of law or a compensation order has been granted.

For example: An employee finds a way to steal money from the company account and resigns shortly thereafter. If there is a Group Pension or Provident Fund in place, the employer may ask the fund trustees (via the fund administrator) to suspend the employees’ Pension or Provident Fund payment, while a case of theft or fraud is opened. Should a court judgment or compensation order be issued within a reasonable amount of time, the employer may recover any costs relating to the employee’s act of fraud from the Pension or Provident Fund benefit available. This can include recovering the stolen money, legal costs etc. This shield is vital to the employer, because it may assist to protect it against any internal threats.

  1. Employer contributions are tax deductible

Employer contributions are considered a company expense and can therefore be deducted against company income. Previously, the amount that employers could contribute to an employee’s Group Retirement Scheme was limited, but this is no longer the case.

As long as SARS does not regard the contribution to be disproportionate in relation to the duties performed by the employee, an employer has an unlimited deduction on employer Group Retirement Scheme contributions.

  1. Staff turnover rates will decrease

Every business owner knows how disruptive and costly staff turnover be. By providing employees with added benefits, you instil loyalty and mutual respect amongst workers, which will lead to happy employees that won’t resign as easily. In addition to that, the company may see an increase in productivity due to a spike in company morale, because employees feel appreciated, and respected when their financial needs are cared for. Employers may also find that by providing their employees with a good Group Pension of Provident Fund, it may act as a retention tool among talented employees.

  1. Protection from creditors and debt collectors

Creditors cannot touch Group Retirement Scheme benefits when a member becomes insolvent. This is especially beneficial to small business owners. With approximately 25 million credit-active consumers in South Africa, there is a good chance of having employees with too much debt. When a Group Pension or Provident Fund is in place, a creditor is not allowed to lay claim on any money that lies in an employee’s Scheme, thereby protecting their retirement funds and future income from debt collectors.

  1. It helps employees to take control of their financial wellness

As an employer, you have a responsibility to educate and empower your employees. By granting employees access to a Group Pension or Provident Fund, employers do exactly that by giving employees the opportunity to take charge of their financial freedom and to see the results thereof. It is also a lot easier to say “goodbye” to a retiring employee, knowing that they have a Retirement Fund to fall back on and from which they can pull a Pension benefit for their golden years.

A Group Pension or Provident Fund can be set-up with the help of an employee benefits specialist. Do not hesitate to get in touch with us today if you would like to find out more about Group Pension and Provident Funds on 011 794 6611 or email info@cseb.co.za. Also remember to follow us on Facebook, LinkedIn and Twitter for more useful and interesting content.

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