The number of unclaimed retirement benefits continues to increase
Employers should actively participate in retirement funds by regularly monitoring unclaimed funds.
South Africa currently has unclaimed retirement benefits amounting to approximately R47 billion.
This is according to the FSCA's 2020/21 annual report, which says the majority of the unclaimed benefits are in trade union and mining industry funds. Most individuals who own these unclaimed benefits are low-income mineworkers.
Despite the FSCA having established procedures for claiming unclaimed benefits and tracing members, the number of unclaimed benefits continues to increase.
Webber Wentzel senior associate Nicolette van Vuuren says there may be several explanations why this may be a particular problem within the mining industry, and why the industry accounts for the majority of unclaimed benefits.
“Firstly, there seems to be poor record-keeping by many funds as well as employers. Often, the fund and employer do not regularly update the employee/member’s personal information, with the effect that it becomes outdated,” Nicolette says.
She says a lack of knowledge and literacy about retirement funds among low-income earners contributes significantly to this problem.
“Many of these workers may not have sufficient literacy to understand the consequences of failing to update their information regularly with their employer or trade union fund, and they may not receive or understand communication about the fund. As a result, they are often unaware that they are entitled to benefits,” says Nicolette.
While the issue is not unique to trade union funds, the tracing of members seems to be a slow and protracted process, seldom yielding successful results.
“The majority of funds attempt to trace members every six months, using the same, out-of-date information they have always had. Naturally this results in unsuccessful traces. “The result of the above is that members and beneficiaries remain untraced, benefits remain unclaimed, and the pot of unclaimed benefits continues to grow.”
The FSCA’s report states that “asset managers and fund administrators continue to earn fees from these unclaimed assets”.
“It has long been the view of the regulator that employers should be active participants in retirement funds, whatever type of fund those might be, including a trade union fund,” says Nicolette.
According to Nicolette, active participation by the employer would ensure that:
- Employee information is regularly updated.
- Unclaimed benefits are monitored regularly, together with fees charged by service providers for administering or managing the unclaimed benefits.
- Employees receive communications about their fund and benefits in a manner and language they can understand.
“Government has proposed draft legislation which will compel an employer to play a more active role in the governance of funds in which they participate. We hope that this will assist in reducing the amount of unclaimed benefits,” says Nicolette.