Are pension fund managers legally accountable for investment losses?

Are pension fund managers legally accountable for investment losses?

Billions lost, explanations offered, but contributors still left in the dark. While the EPF assures transparency and blames ‘global market volatility’, the legal world tells a deeper story. Around the world, pension fund trustees have been sued, sometimes successfully. Discover how courts in the UK, US, and Commonwealth nations deliver justice when public and pension funds go astray — and what it means for every Malaysian who contributes.

by GK Ganesan August 2, 2025 2641 Views

I. EPF FUND LOSS AND LEGAL LIABILITY

When a nation’s largest pension fund suffers serious losses, every contributor has one burning question:

“If this was my money, who would be responsible?”

Whether in Parliament, on the editorial desks of investigative journalists, or in the crowded waiting rooms of retirees, the answer is not so simple.

Globally, courts have wrestled with these questions — and, in many cases, found those in power wanting.

This essay examines the worlds of statute and common law, pulling back the curtain on international case law, parliamentary debates, and the harsh light of accountability.

The Malaysian Legal Framework

The Employees Provident Fund Act 1991 (Act 452) makes the EPF Board a legal trustee of the Fund. Trustees can invest the Fund in a broad range of assets (subject to regulatory oversight) but must act in good faith and in the contributors’ best interests¹.

If losses or deficiencies are caused by improper payment, deficient accounting, failure to keep records, or unexplained delays, those responsible can be “surcharged” for civil recovery, and criminal charges may be brought for fraud or negligence².

The Financial Services Act 2013 reinforces these protections with heavy penalties (up to ten years’ imprisonment, major fines, and director disqualification) for mismanagement or unlawful investment conduct in financial institutions, including the EPF as a statutory body³.

How Have Investment Losses Occurred in the EPF and How Are They Explained?

Recent years have seen substantial losses and impairments in certain subsidiaries and investments of Malaysia’s Employees Provident Fund (‘EPF’).

For instance, the Auditor-General’s Report (2025) found that nine EPF subsidiaries sustained combined losses of RM224.21 million in 2023, after RM76.51 million (2022) and RM49.76 million (2021). The highest loss was recorded by KWASA Europe S.à r.l., at RM158.42 million in 2023.

EPF’s overall investment income for the first quarter of 2025 fell to RM18.31 billion, marking a 13% year-on-year decline. P. Gunasegaram, a senior journalist, correctly points out that this in fact a 23% loss.⁴

The EPF attributes these losses to global financial “market volatility, rapid shifts in monetary policy, and the underperformance of certain equities”, describing many losses as “paper” (mark-to-market) and emphasizing adherence to “internal investment policies”.⁵.

II. WHAT DO CRITICS AND PARLIAMENTARIANS SAY ABOUT EPF INVESTMENT PRACTICES?

Members of Parliament have repeatedly pressed for greater transparency and accountability regarding EPF investment losses. For example, a walkout in April 2023 occurred when a debate on the EPF was blocked in Parliament.

This highlights growing dissatisfaction over government explanations. In the 1986 MAKUWASA affair, opposition MPs questioned the loss of millions through secret share deals and called for statutory and legal accountability⁶.

Commentators such as P. Gunasegaram have described some of EPF’s leadership actions as bordering on criminal negligence, especially decisions permitting RM60 billion in pandemic-related withdrawals, which he claims have irreparably damaged long-term retirement savings.

He has criticized the opacity of EPF’s investment disclosure and stressed the need for independent parliamentary oversight.⁷.

III. DO TRUSTEES OWE A DUTY TO PENSION FUND CONTRIBUTORS? HOW IS IT ENFORCED?

Trustees have a universal duty of loyalty and prudence—to act in the exclusive interests of all contributors, invest wisely, avoid self-dealing, and exercise due skill and care.

In Malaysia, these duties appear in the EPF Act, enforced through surcharges, civil proceedings, and criminal charges.⁸

The Financial Services Act overlays an explicit code of prudent conduct and transparency for all financial institutions.⁹

In the UK, these are codified in the Pensions Act 2004 and common law trust principles, with enforcement by The Pensions Regulator and civil courts¹⁰.

Under ERISA, US fiduciaries face personal liability and government enforcement. In Australia, statutory duties under the Superannuation Industry (Supervision) Act 1993 are policed by regulatory agencies and courts¹¹. South African, New Zealand, and Canadian law provide similar frameworks.

IV. ARE THOSE WHO RUN PENSION FUNDS LIKE EPF EVER SUED FOR LOSSES? WHAT DOES GLOBAL EXPERIENCE SHOW?

Statute Law and Common Law: UK, US, Europe, and the Commonwealth

United Kingdom:

The Pensions Act 2004 and Pension Schemes Act 2021 require trustees and managers to exercise ‘prudent investment’ and act ‘solely in the best interests of beneficiaries’. The Pensions Regulator is empowered to prosecute for gross breaches.

Where trust law is engaged, personal liability arises for losses resulting from imprudent or conflicted conduct.

In Taylor v Taylor Young, trustees were found liable for ‘failing to diversify a portfolio’ overly concentrated in equities, though indemnity may be available if acts were ‘reasonable’.¹²

Fiduciary breach cases—especially regarding ESG investment factors—have been central to recent litigation.

Australia, South Africa, New Zealand, Canada:

McVeigh v REST established that superannuation trustees must manage climate risk under the Corporations Act 2001 as part of their duties of prudence and care. The REST Fund, in settlement, agreed to fuller climate disclosures and net-zero commitments.¹³.

In South Africa, Section 7C of the Pension Funds Act imposes personal liability on trustees for damages arising from ‘breach of duty’ or ‘fraud’, as emphasied in Moropa v Chemical Industries National Provident Fund, which led to trustee removal and compensation orders.¹⁴.

Similar provisions exist in New Zealand and Canada, where breach of the fiduciary standard results in personal accountability.

Categorised Case Law Table

Jurisdiction	Case / Example	Breach Type	Remedy / Outcome
UK	Taylor v Taylor Young [2016] EWHC 2163 (Ch)	Prudent investment	Trustees partly liable, excused if reasonable.¹⁵
US	Central States v Laguna Dairy (2025)	Withdrawal liability	Recovery from affiliates.¹⁶
Australia	McVeigh v REST [2020] FCA 1556	Climate disclosure	Settlement: greater climate disclosure.¹⁷
South Africa	Moropa v Chemical Industries (2022)	Fraud, conflict	Trustees removed, ordered damages.¹⁸
New Zealand	FMA v Mercer NZ Ltd [2021] NZHC 1231	Fiduciary breach	Trustees are liable for losses.¹⁹

V. HOW HAVE CONTRIBUTORS, MPS, AND THE PUBLIC GONE AFTER PENSION FUND LEADERS?

Globally, contributors and policymakers use legal actions, parliamentary investigations, and public criticisms. Lawsuits and class actions are launched for ‘negligent investment’, ‘non-disclosure’, or ‘self-interested transactions’.

Parliamentarians in Malaysia and the UK have used audits and select committee reviews. Noted international writers, like John Authers (UK) and Michael Lewis (US), regularly criticise ‘pension governance failures’.

In Malaysia, commentators have consistently advocated for greater openness and sanctions for mismanagement.²⁰.

Organisations such as the OECD warn of ‘governance and discipline failures’, emphasising the link to ‘weak board oversight’.²¹.

VI. DISCREPANCIES: DO OFFICIAL EXPLANATIONS ALIGN WITH FIDUCIARY ACCOUNTABILITY?

Official statements about ‘global volatility’ often obscure a lack of transparency over ‘internal risk controls’ or ‘remedial actions’.

Critics such as P. Gunasegaram have repeatedly called this out in Malaysian media, pushing for independent oversight, better disclosure, and swift disciplinary action where needed.²².

As seen worldwide, investment losses are not always evidence of breach or mismanagement. Courts focus on whether trustees ‘acted with reasonable skill and care’ or ‘failed in their duties’.

Where transparency is lacking, or explanations are evasive, public suspicion and vulnerability to legal action escalates. When fiduciaries breach the law or ‘fail to disclose material risks’, the law provides for financial, personal, and sometimes criminal consequences.²³.

SO…

From London to Kuala Lumpur, the story is the same: those trusted with the nation’s savings stand guard not just over money, but over dignity in old age.

Statute and common law require honest, diligent stewardship; breaches—be they negligent, reckless or fraudulent—invoke real and enforceable consequences.

The path to accountability may be fraught, but only fierce public scrutiny and fearless legal stewardship will keep the hard-earned funds of millions truly safe.

Only honest, accountable stewardship can secure dignity in retirement.

∞§∞

Gratitude

The author thanks Mr UK Menon, Mr P. Gunasegaram, Miss KN Geetha, Miss Lydia Jaynthi, Miss TP Vaani, and Miss JN Lheela.

We thank Danie Franco of Unsplash, for the image.

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Are pension fund managers legally accountable for investment losses?

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