Un­paid pen­sions saga hots up

The FSB ap­pears to have upped its game as the ex­tent of un­paid ben­e­fits emerges and public scru­tiny and pres­sure in­ten­sify

Mail & Guardian - - Business - Lyn­ley Don­nelly

The Fi­nan­cial Ser­vices Board (FSB) has moved to clar­ify its ef­forts to re­solve the bal­loon­ing prob­lem of un­claimed pen­sion ben­e­fits, even as civil so­ci­ety cam­paign­ers step up a drive to help work­ers to re­claim bil­lions owed to them.

By 2016, more than R42-bil­lion in un­claimed ben­e­fits had been amassed in the pen­sions sys­tem, the FSB said at a me­dia round­table ear­lier this week.

About R7.6-bil­lion is held in spe­cially cre­ated un­claimed ben­e­fits preser­va­tion funds, and about R34.7bil­lion is held in oc­cu­pa­tional funds, or re­tire­ment funds, cre­ated by em­ploy­ers for their em­ploy­ees and which are ac­tive.

The amount of money un­claimed by ben­e­fi­cia­ries be­gan to rise dra­mat­i­cally from about 2010, with a sharp leap be­tween 2013 and 2014, FSB data shows.

But, said Takalani Lukhaimane, the man­ager for pen­sions en­force­ment and sur­veil­lance, greater re­port­ing and dis­clo­sure re­quire­ments from funds re­lat­ing to un­claimed ben­e­fits and changes to how funds clas­sify these as­sets have in part contributed to the in­creases.

This can be seen in the 66% spike in un­claimed ben­e­fits be­tween 2013 and 2014 af­ter two large funds re­clas­si­fied about R11-bil­lion in as­sets as un­claimed ben­e­fits.

About 60% of the un­claimed ben­e­fits in oc­cu­pa­tional funds be­long to em­ploy­ees in the min­ing, mo­tor, metal and en­gi­neer­ing in­dus­tries.

Chief ex­ec­u­tive Dume Tshidi said the his­tor­i­cal prob­lem of trac­ing ben­e­fi­cia­ries re­mained, some of whom worked in the pre-demo­cratic era when apartheid iden­tity doc­u­ments did not cor­re­spond with those is­sued post-1994 and when many work­ers were forced to lie about their iden­ti­ties, in­clud­ing us­ing false names and ID num­bers, to gain em­ploy­ment.

Lukhaimane said it was dif­fi­cult to trace ben­e­fi­cia­ries who were mi­grant work­ers from neigh­bour­ing coun­tries or from ru­ral ar­eas. And the prob­lem of the mis­use or du­pli­ca­tion of ID num­bers con­tin­ues to­day in some sec­tors, she said, for ex­am­ple in the se­cu­rity in­dus­try

“Be­cause the funds don’t have ac­cu­rate in­for­ma­tion, be­cause of his­toric or cur­rent prob­lem, it’s dif­fi­cult for them to trace some­body,” she said.

The cost of trac­ing a ben­e­fi­ciary can be more than the amount owed to them, Lukhaimane said.

Just un­der 17% of the mem­bers in these funds are owed less than R100. For about 26% of mem­bers, the amount owed is less than R250. The FSB said these small amounts rep­re­sent a very small por­tion of the to­tal value of un­claimed ben­e­fits — about 0.6% and 2% re­spec­tively.

But civil so­ci­ety cam­paign­ers ar­gue that vested in­dus­try in­ter­ests, such as large pen­sion funds ad­min­is­tra­tors, are not do­ing enough to trace ben­e­fi­cia­ries and that the reg­u­la­tor is not ad­e­quately en­sur­ing they pay claimants out.

Mof­fat Chauke, of the Un­paid Ben­e­fits Cam­paign, said fund ad­min­is­tra­tors do not do a good enough job of trac­ing ben­e­fi­cia­ries. He said the cam­paign be­gan or­gan­is­ing in 2015 in the Vaal area.

“They [ad­min­is­tra­tors] don’t use home af­fairs, they haven’t con­tacted the rev­enue [ser­vice],” Chauke said, adding that trac­ing could be done us­ing cell­phones and the Reg­u­la­tion of In­ter­cep­tion of Com­mu­ni­ca­tions and Pro­vi­sion of Com­mu­ni­ca­tion­re­lated In­for­ma­tion Act (Rica).

Public in­ter­est in the ques­tion of un­claimed ben­e­fits has grown since the FSB found it­self in a court bat­tle with the for­mer deputy reg­is­trar for pen­sion funds, Rose­mary Hunter, which be­gan in 2016.

Hunter took the FSB to court over its handling of the so-called “can­cel­la­tions project” — a long-run­ning effort by the FSB to can­cel thou­sands of dor­mant or or­phaned pen­sions funds.

Hunter raised red flags over what she said were un­law­ful steps taken by the FSB to close these funds, with­out prop­erly en­sur­ing that they had no as­sets or li­a­bil­i­ties, or that money had been trans­ferred to un­paid ben­e­fit funds.

The pos­si­ble prej­u­dice to mem­bers could run into bil­lions of rands. The FSB has stren­u­ously de­nied Hunter’s claims.

The high court ruled against Hunter at the end of last year, re­fus­ing her leave to ap­peal the case. But, af­ter tak­ing the mat­ter to the Supreme Court of Ap­peal, which also dis­missed her case, the Con­sti­tu­tional Court will hear Hunter’s ap­pli­ca­tion for leave to ap­peal and ar­gu­ments on its mer­its in Fe­bru­ary next year.

The Un­paid Ben­e­fits Cam­paign and fel­low non­govern­men­tal or­gan­i­sa­tion Right2Know have pub­licly sup­ported Hunter.

But the prob­lem is broader than the can­cel­la­tions project, said Dale McKin­ley, a na­tional work­ing group mem­ber of Right2Know.

“The [reg­u­la­tor] has not been do­ing its job,” he said, ar­gu­ing that it has al­lowed in­dus­try play­ers to “cyn­i­cally” sit on the money, earn­ing high ad­min­is­tra­tion fees.

The in­dus­try has not been proac­tively trac­ing in­di­vid­u­als, par­tic­u­larly peo­ple who are hard to find, such as mi­grant work­ers from neigh­bour­ing coun­tries.

A sec­ondary prob­lem is that of “in­sti­tu­tional mazes and bu­reau­cracy”, which im­pedes ben­e­fi­cia­ries when they try to claim the money owed to them, he said.

The growth in the num­ber of un­claimed ben­e­fits in re­cent years sug­gests the ma­jor­ity were not to peo­ple who were work­ing dur­ing apartheid but rather to peo­ple who had re­tired or been re­trenched in the past 15 to 20 years, McKin­ley said.

The FSB de­nied it has in­ten­si­fied its work to ad­dress the un­claimed ben­e­fits prob­lem be­cause of in­creased public scru­tiny and the Hunter court bat­tle.

Since 2007, more than R22-bil­lion in un­claimed ben­e­fits has been paid out to al­most one mil­lion ben­e­fi­cia­ries, ac­cord­ing to fi­nan­cial records sup­plied by funds to the reg­is­trar’s of­fice. About R18-bil­lion was paid out in the past five years, with an av­er­age of about R26 787 a mem­ber.

From 2009, when the FSB be­gan re­quir­ing more dis­clo­sure on un­claimed ben­e­fit funds, it con­tin­ued to pro­vide re­sources for the mat­ter as more in­for­ma­tion came to light, Lukhaimane said.

In Au­gust, it launched a search engine on its web­site us­ing in­for­ma­tion from funds and ad­min­is­tra­tors to help mem­bers of the public to find out whether money is due to them.

It will be launch­ing an SMS ser­vice in the com­ing months to reach po­ten­tial ben­e­fi­cia­ries who may not have in­ter­net ac­cess.

As far back as 2004, the FSB pro­posed leg­isla­tive changes to house all un­claimed ben­e­fits un­der one cen­tral fund. The pro­posal was not re­alised, but this year the FSB has again pro­posed amend­ments to the Pen­sion Fund Act to pro­vide for a cen­tral fund.

This could be ex­panded to in­clude the un­claimed money sit­ting in other in­dus­tries, such as the in­surance and bank­ing sec­tors.

Aside from un­claimed funds in the pen­sions sys­tem, there are bil­lions in un­claimed funds sit­ting in life in­surance poli­cies and col­lec­tive in­vest­ment schemes.

In ad­di­tion, the FSB does not reg­u­late some state-linked pen­sion funds, such as the Gov­ern­ment Em­ploy­ees Pen­sion Fund, the Transnet Re­tire­ment Fund and the Post Of­fice Re­tire­ment Fund.

Rose­mary Light­body, a se­nior pol­icy ad­viser of the As­so­ci­a­tion for Sav­ings and In­vest­ment South Africa (Asisa), said that, as of De­cem­ber 31 2016, there was another R4.4-bil­lion in un­claimed as­sets in long-term in­surance poli­cies and col­lec­tive in­vest­ment schemes.

Asisa’s stan­dard on un­claimed as­sets com­mits its mem­bers to honouring un­claimed pol­icy and in­vest­ment ben­e­fit claims by right­ful own­ers “no mat­ter how long it takes”, she said.

This was the first set of data re­ceived from mem­ber com­pa­nies since the stan­dard was ex­tended be­yond life in­sur­ers, ef­fec­tive from the be­gin­ning of 2016, she said.

In the six-month pe­riod be­tween July 1 and De­cem­ber 31 2016, more than 37000 ben­e­fi­cia­ries or in­vestors were traced and paid out as­sets worth R5.6-bil­lion, she said.

Com­pa­nies are re­quired to start trac­ing pol­i­cy­hold­ers, ben­e­fi­cia­ries or in­vestors within six months of the as­sets be­com­ing payable, Light­body said. Re­ports re­ceived from mem­ber com­pa­nies show at least four trac­ing ini­tia­tives per case, in­clud­ing the use of trac­ing agen­cies, pri­vate in­ves­ti­ga­tors, the depart­ment of home af­fairs and credit bureaux, she said.

Mem­bers also make use of so­cial me­dia, such as Facebook and LinkedIn, and ap­proach pro­fes­sional mem­ber­ship bod­ies.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.