By Juané Van Aardt
The Financial Institutions and Markets Act, 2 of 2021 (FIMA) came into force on 1 May 2026, repealing the Pension Funds Act, 24 of 1956 (PFA).
Among FIMA’s most consequential reforms is the removal of the employer’s right to recover compensation from a departing employee’s pension fund benefit for theft, dishonesty, fraud or misconduct.
The previous position Under the Pension Funds Act
Section 37D(b)(ii) of the PFA permitted a pension fund to deduct compensation from a member’s benefit for damage caused by theft, dishonesty, fraud or misconduct, provided the member admitted liability in writing or a court judgment had been obtained.
This gave employers an efficient recovery mechanism against any benefit payable to the member.
The new position under FIMA
FIMA has repealed the PFA. Section 277 of FIMA serves to regulate the same issue formerly regulated under section 37D of the PFA and limits permissible deductions to income tax, prescribed housing loans, amounts for medical aid, funeral expenses, insurance premiums, maintenance orders, and employee tax withholdings.
Critically, FIMA does not reproduce section 37D(b)(ii); there is no longer a statutory provision permitting deductions for theft, dishonesty, fraud, or misconduct.
This should be read together with section 12 of the Labour Act, 11 of 2007, concerning permissible deductions from an employee’s remuneration.
Practical implications for employers and employees
Employers can no longer rely on pension funds to recover losses from employee wrongdoing and must pursue conventional civil remedies.
Section 274 of FIMA reinforces this by providing that pension benefits cannot be attached or executed against.
Employers should strengthen internal controls, ensure adequate fidelity guarantee insurance, and pursue civil claims promptly before assets are dissipated.
For employees, the change is protective. Pension benefits are now more fully ring-fenced against employer claims, though permissible deductions remain for tax, housing loans, medical aid, funeral expenses, insurance premiums, and maintenance orders.
Transitional considerations
Fund rules conflicting with FIMA must be amended, and any rules purporting to authorise deductions under the former section 37D(b)(ii) are unenforceable. NAMFISA retains power to investigate breaches of the repealed PFA for three years after 1 May 2026.
Conclusion
FIMA has materially altered the balance between employer recovery rights and employee pension protection. Employers should review their risk-management frameworks and pursue any existing misconduct-related claims through civil litigation without delay.
* Juané Van Aardt, Senior Associate, Bowmans Namibia
