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Unclaimed benefits – The problems persist

The problem with unclaimed benefits is decades old. Each year various statistical reports add up the billions and initiatives are launched to track the beneficiaries of the unclaimed funds. Will the latest drive by the FSCA reduce the unclaimed “pot of gold”? Will the current financial distress of South Africans increase the call to claim?

The last Annual Report of the Registrar of Pension Funds (December 2018) stated that approximately R44 billion in unclaimed benefits is owed to about 4.4 million beneficiaries. In May 2019, Rosemary Lightbody, senior policy adviser at ASISA, also indicated that despite the efforts already made by member companies, it is estimated that unclaimed assets worth R17.1 billion held in 147 221 products still need to be returned to its legal owners.

In the interim, Liberty has also applied to reinstate 10 more funds that have unclaimed benefits to the value of R30 million. The insurer first announced in 2018 that there was a possibility that it deregistered up to 120 funds in error during the FSB’s dormant retirement fund cancellations project. These millions will now also form part of the unclaimed benefits total.

What are unclaimed benefits?

An unclaimed benefit is a sum of money that is due to a retirement fund member (or beneficiaries) that has remained unclaimed for 24 months since the date it becomes legally payable.

According to Alexander Forbes their experience indicates that, if beneficiaries are not traced within 24 months, there is only a 10% chance of finding them. Data from the Alexander Forbes Unclaimed Benefit Fund shows that 49.8% of unclaimed monies are older than eight years and tracing had been attempted more than once.

As stated by the ASISA Standard on Unclaimed Assets, ASISA member companies are required to retain records that allow the tracing process to be audited and verified by the company’s internal compliance and audit functions. However, Lightbody also reminded consumers that it is also their responsibility to ensure that the relevant financial institutions have their updated contact details and beneficiary nomination forms on record. “This will ensure that assets are paid to the rightful owners when they become due,” she stated.

FSCA’s drive to trace unclaimed money owners

In a recent interview with Sanele Magazi, Manager: Retirement Funds of the Financial Sector Conduct Authority (FSCA), it was established that almost 4.8 million South Africans have not yet claimed their pension savings, worth in total almost R43 billion. “One of the reasons for having so many unclaimed benefits are that many of it dates back to the eighties. As a result, it is difficult to trace beneficiaries as they have changed addresses and, in some instances, also did not have ID numbers or fixed places of abode with traceable addresses. Poor record keeping by the funds also contributes to the unclaimed benefits,” Magazi clarifies.

Magazi explains that the funds are ultimately responsible for tracing these unclaimed benefits and use various tracing agents as their service providers. However, he warns that there are rogue agents who defraud people, claiming to be tracing agents claiming to be representing the FSCA or pension funds.” The FSCA does not charge any member for assistance and a genuine tracing agent will never ask for a fee from a member,” he reiterates.

As a result, the FSCA is urging South Africans to go online through their database and not use independent tracing agents to check if they qualify.

Olano Makhubela, divisional executive of retirement funds at the FSCA also told the media that National Treasury announced in the 2020 Budget that legislation will be prepared to consolidate unclaimed benefits in the retirement industry and establish a single registry. “The new Conduct of Financial Institutions Bill (COFI) seeks to establish a single, centralised fund for all unclaimed pension funds. While this centralised fund will initially only require regulated pension funds that fall under the jurisdiction of the FSCA to pay over all unclaimed funds, it may in time be expanded to include unclaimed funds from the GEPF as well as insurance companies,” Makhubela explains.

Makhubela also advises South Africans to use the FSCA database, which can be searched for free by simply visiting the website. Potential beneficiaries can also SMS their ID number to 30913 or email an enquiry to pension.queries@FSCA.co.za.

Click here to listen to the interview with Sanele Magazi.

Click here to view the eNCA interview.

Click here to read the Alexander Forbes article where they explore a proposed strategy how unclaimed retirement benefits can be put to better use.

Click here to read the Business Insider interview with Makhubela

Click here to download ASISA’s Standard on Unclaimed Assets.

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