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Financial Services Board. The role of FSB in supporting efforts towards the disbursement of benefits for mineworkers Presentation for Regional Dialogue. By: Carlo da Gama. 26 March 2015. Overview of FSB. Established in 1991;
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Financial Services Board The role of FSB in supporting efforts towards the disbursement of benefits for mineworkers Presentation for Regional Dialogue By: Carlo da Gama 26 March 2015
Overview of FSB • Established in 1991; • Independent institution established by statute to oversee the South African Non-Banking Financial Services Industry in the public interest; • Our vision is to promote and maintain a sound financial investment environment in South Africa; • Our mission is to promote the: • Fair treatment of consumers financial services and products; • Financial soundness of financial institutions; • Systemic stability of financial services industries; and • The integrity of financial markets and institutions.
Overview of Retirement Fund Industry • Administrators: 168 • Number of funds: 5,000 • Members: 13,4 million • Total assets: R1,8 trillion
What is an unclaimed benefit? • Defined in the Pension Funds Act (‘PFA’) as: • benefit other than those mentioned below, not paid to a member, former member or beneficiary within 24 months of the date on which it, in terms of the rules of the fund, became legally due & payable; • a benefit payable as a pension / annuity to a member, former member or beneficiary within 24 months of – • the expiry of the guarantee period for pension payments provided for in the rules of the fund; or • the date on which any pension / annuity legally due & payable in terms of the rules of the fund became unpaid; • surplus benefit payable to former member that cannot be traced - not paid within 24 months after surplus approval; • any benefit that remains unclaimed/unpaid to a member, former member or beneficiary when a fund applies for cancellation or registration or where the liquidator is satisfied that benefits remain unclaimed / unpaid, excluding – • section 14 transfer, where annuity is purchased i.r.o pensioner or otherwise in terms of the PFA; • death benefit payable to a beneficiary i.t.o s37C not paid within 24 months from date of death of member.
How do unclaimed benefits arise? • Employer provides inaccurate or incomplete member information; • Fund administrator capture errors; • Administrator churn; • Member education/awareness; • Information changes after member leaves fund; • Member not registered for tax; • Incomplete or no withdrawal documentation received; • Migrant labour particularly in mining sector.
Establishment of Unclaimed Benefit Funds • Prior to 2007, retirement funds had provisions in their rules allowed for unclaimed benefits that remained unclaimed to revert back to funds. Prescription Act allowing for benefit not claimed within 3 years to prescribe; • In 2007 PF Circular No. 126 issued to all retirement funds: • Provided guidelines on treatment on unclaimed benefits; • Introduced a definition of an unclaimed benefit. • Retirement funds were required to amend their rules to in-line with Circular before 31 December 2008. • Financial Services Laws General Amendment Act 22 of 2008 inserted a definition of an unclaimed benefit in section 1 of the PFA.
Establishment of Unclaimed Benefit Funds(continued) • The Revenue Laws Amendment Act 60 of 2008 provided for establishment of unclaimed benefits funds – ‘special’ purpose preservation funds. • Financial Services Laws General Amendment Act No. 45 of 2013 inserted a definition of an unclaimed benefit fund in section 1 of the PFA to mean: • “a fund that is established for the receipt of unclaimed benefits contemplated in the definitions of a pension preservation fund and a provident preservation fund in section 1 of the Income Tax Act, 1962 (Act No. 58 of 1962)”; • Since 2009 a number of funds submitted applications in terms of section 4 of PFA to register as unclaimed benefit funds.
Overview of Unclaimed Benefits • Unclaimed benefit funds (50 ‘active’ funds): - R4,6 billion - 792,000 beneficiaries • Aggregate unclaimed benefits (including occupational, retail and unclaimed benefits funds): - R20 billion - 3.5 million beneficiaries • Mining Sector: - R5,2 billion - 200,000 beneficiaries
Role of the FSB in relation to unclaimed benefits • Complaints in terms of the PFA dealt with by the Office of the Pension Funds Adjudicator; • Section 30I (1) of the PFA: “The Adjudicator shall not investigate a complaint if the act or omission to which it relates occurred more than three years before the date on which the complaint is received by him or her in writing.” • The PFA only empowers the FSB to make enquiries with administrators, funds and other parties (employers); • On this basis, we assist complainants who are unable to lodge a complaint with the Office of the Pension Funds Adjudicator– ‘walk-in’, telephonic (call centre), electronic mail and post.
Statistics on complaints • Following the publication of article in Business Day we received +/-3,000 calls per day (average is 150) up to December 2014. • Dedicated email address (fsb.pensionsunclaimed@fsb.co.za) in December 2014. 847 emails to date. • Of 847 emails only able to assist +/- 15% of members. • More than 120 walk-in clients since November 2014 to date.
Challenges in assisting with unclaimed benefits • No central database; • Member education/awareness; • Information required in order to investigate such as name of pension fund, name of employer, proof of membership (benefit statement) and payslip; • Time lapse – adverse impact on data / record keeping; • Nature of funds might not have required employer names to be provided to our office therefore not on our records.
Challenges in assisting with unclaimed benefits(continued) • Access and means to complain/enquire with administrator, funds or FSB office; • Misinformation leading to exploitation - No regulation of tracing agents and/or 3rd parties acting on behalf of members; • “Red tape” when claiming benefits eg. stamp by employer or originals documents.
Solutions and Proposals to Other Stakeholders • Central database maintained by the registrar (issue PF. Circular to collect information from funds/administrators - preliminary info to assist member); • Unclaimed benefits communication project – media and print; • Enhancing FSB supervision of unclaimed benefits within occupational, retail and unclaimed benefit funds: • Draft PF. Circular for exemptions of transfers of unclaimed benefits; • Supervision of tracing agents; • Reporting of tracing and payment efforts by funds; • Quality audit on member information and additional prescribed minimum information (such as cellphone number)
Solutions and Proposals to Other Stakeholders(continued) • Greater co-ordination between FSB, funds, administrators and organisations representing members; • Preparation of information circular to inform members in major labour sending countries (Lesotho, Swaziland, Mozambique and Botswana) of unclaimed benefits; • To address POPI concerns, work with industry to draft a proposed code for employee benefits industry which would allow us to collect and subject to appropriate controls share information on unclaimed benefits.